Uncertainty Quantification and Global Sensitivity Analysis for Economic Models

CER-ETH - Center of Economic Research at ETH Zurich, Working Paper 17/265, January 2017

45 Pages Posted: 31 Jan 2017

See all articles by Daniel Harenberg

Daniel Harenberg

ETH Zürich - CER-ETH - Center of Economic Research at ETH Zurich; Oxford Economics

Stefano Marelli

ETH Zurich - Chair of Risk, Safety and Uncertainty Quantification

Bruno Sudret

ETH Zurich

Viktor Winschel

ETH Zürich

Multiple version iconThere are 2 versions of this paper

Date Written: January 13, 2017

Abstract

Sensitivity analysis assesses the influence of input parameters on the conclusion of a model. Traditional analysis methods—based on evaluating the model at a reference parameter vector and changing one parameter at a time—are local, linear, and usually do not capture interactions among the parameters. By contrast, the global sensitivity analysis that we present summarizes the parameters’ importance over a range of values, fully capturing nonlinearities and identifying interactions. Specifically, we propose Sobol’ indices, which are based on variance decomposition, and exemplify their use with a standard real business cycle model. Standard approaches to variance decomposition require a large number of model evaluations. To overcome this, we present the state-of-the-art approach for calculating Sobol’ indices, which is based on building a polynomial representation of the model from a limited number of evaluations. In addition, we use this polynomial representation to evaluate the univariate effects, which are conditional expectation functions that can be interpreted as a robust impact of a parameter on the model conclusions.

Keywords: computational techniques, uncertainty quantification, global sensitivity analysis

JEL Classification: C60, C63

Suggested Citation

Harenberg, Daniel and Marelli, Stefano and Sudret, Bruno and Winschel, Viktor, Uncertainty Quantification and Global Sensitivity Analysis for Economic Models (January 13, 2017). CER-ETH - Center of Economic Research at ETH Zurich, Working Paper 17/265, January 2017. Available at SSRN: https://ssrn.com/abstract=2908760 or http://dx.doi.org/10.2139/ssrn.2908760

Daniel Harenberg (Contact Author)

ETH Zürich - CER-ETH - Center of Economic Research at ETH Zurich ( email )

Zürichbergstrasse 18
Zurich, 8092
Switzerland

Oxford Economics ( email )

United Kingdom

Stefano Marelli

ETH Zurich - Chair of Risk, Safety and Uncertainty Quantification ( email )

Stefano-Franscini-Platz 5
Zurich, Zurich 8093
Switzerland
+416330670 (Phone)

HOME PAGE: http://www.rsuq.ethz.ch

Bruno Sudret

ETH Zurich ( email )

Rämistrasse 101
ZUE F7
Zürich, 8092
Switzerland

Viktor Winschel

ETH Zürich ( email )

Zürichbergstrasse 18
Zürich, Zürich 8'32
Switzerland
+49-1797621055 (Phone)

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