What does ‘understanding the economy’ mean? Routinely economists point out missed opportunities which the market then exploits (IIRC one of the standard examples was a paper which discovered a small average rise on Mondays), or simple models outperform the economists’ predictions of the future.
By “understand”, I mean have a sufficiently good model to make high quality predictions about what key economic variables are going to do. And I wouldn’t call papers like the one on the Monday effect routine, though they do happen.
What does ‘understanding the economy’ mean? Routinely economists point out missed opportunities which the market then exploits (IIRC one of the standard examples was a paper which discovered a small average rise on Mondays), or simple models outperform the economists’ predictions of the future.
By “understand”, I mean have a sufficiently good model to make high quality predictions about what key economic variables are going to do. And I wouldn’t call papers like the one on the Monday effect routine, though they do happen.