Score contribution per author:
α: calibrated so average coauthorship-adjusted count equals average raw count
This paper takes the Court of the Bank of England’s Terms of Reference for the Bernanke Review seriously. We explore the underlying issue of radical uncertainty and what this means for forecasting and monetary policy-making. The only logical way to proceed is to embrace Bernanke’s suggestion that we engage ‘alternative modelling frameworks’. What might these be? We need a combination of different types of models, some with closed equilibrium solutions and others that rely on simulations that can provide different insights into what is happening in the economy. The old saying that ‘it takes a model to beat a model’ is just that. We now know that Agent Based Models can perform at least as well as equilibrium models, even on the latter’s own narrow criteria, despite the fraction of resources used in their development. If the Bank is to serve its mission of ‘promoting the good of the people of the UK’ it must start by accepting reality and not limiting itself to a single model framework as if it will somehow deliver ‘the truth’ if only it had more resources.