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Explaining and Forecasting the Psychological Component of Economic Activity

Explaining and Forecasting the Psychological Component of Economic Activity

This video was recorded at International Workshop on Coping with Crises in Complex Socio-Economic Systems. We develop a methodology for estimating the parameters of dynamic opinion or expectation formation processes with social interactions. We study a simple stochastic framework of a collective process of opinion formation by a group of agents who face a binary decision problem. The aggregate dynamics of the individuals' decisions can be analyzed via the stochastic process governing the ensemble average of choices. Numerical approximations to the transient density for this ensemble average allow the evaluation of the likelihood function on the base of discrete observations of the social dynamics. This generic approach can be used to estimate the parameters of various opinion formation... Show More
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