A method for estimating width bands of variables in economics under uncertainty conditions

Abstract

This study develops a method to estimate the width bands of variables in economics by fuzzy logic. One of its important features is flexibility in the conditions of economic uncertainty, which can be used to model the uncertainty of external and internal factors on economic variables. In this study, for example, the effect of uncertainty of external factors on the Gini coefficient (income distribution) is investigated. For this purpose, we use the fuzzy logistic smooth transition autoregressive (FLSTAR) model and the Gini coefficient is estimated in three bounds (high, middle and low). The result of this estimation suggest that by appropriate policy making the Gini coefficient can be decreased to the lower bound. Another results of this study is that the authorities should prevent the increase of the Gini coefficient in the middle and upper bands with proper planning for the future. In brief, • This study introduces a novel method for estimating high, low and middle bounds of economic variables under uncertainty conditions. • One practical results of this method is to compare high, medium, and low bands of the variables with their current trends, which is a benchmark for policymaking and evaluating the effectiveness of government's policies. • Programs designed with this method are fast and have low cost

Keywords

• FLSTAR model
• Bounds
• Gini coefficient