Research Seminar Series: Professor Adrian Pagan

Dear Academic and Corporate Peers,

We are thrilled to invite you to the upcoming session of the Research Seminar Series at the Asia School of Business, featuring Professor Adrian Pagan.

Seminar Title: Knowing the Limits of Shock Recovery in Macroeconomic Models

Event Details

📅 Date: 3rd June 2026

⏰Time: 10:30 AM – 11:30 AM

📍Venue: CR-W2-04

💻 Zoom Details :

https://asb-my.zoom.us/j/99706004150?pwd=GbXuoC94bEbsUC49CYCG2bqEibFHDv.1

Meeting ID: 997 0600 4150

Passcode: 622792

Abstract

Macroeconomic policy analysis increasingly relies on structural models to estimate latent variables such as the neutral real interest rate, potential output, and inflation trends, as well as to evaluate counterfactual policy scenarios. However, an important question arises: can these models genuinely recover the underlying shocks and latent variables they are designed to measure?

This talk examines the concept of recoverability in macroeconomic models and highlights fundamental limitations that emerge when models contain more shocks than observable variables. Drawing on recent research, the presentation shows that widely used approaches for estimating “star” variables and constructing counterfactual policy responses may fail to recover the underlying economic forces of interest, even when the model itself is correctly specified.

The talk first reviews the recoverability of latent “star” variables — including the neutral real interest rate and potential output — in influential policy models such as those of Laubach and Williams and their extensions. It then discusses the challenges of recovering counterfactual outcomes in DSGE frameworks, particularly in the presence of news shocks, imperfect proxies, and non-invertible systems.

Overall, the presentation emphasizes the practical implications of recoverability problems for macroeconomic interpretation and policymaking and argues for greater caution in drawing policy conclusions from estimated latent variables and counterfactual exercises.

Speaker Bio

Adrian Pagan is a distinguished Australian econometrician and macroeconomist whose research has significantly influenced empirical macroeconomics, econometric methodology, and policy modelling. He obtained his Bachelor of Economics with First Class Honours and a University Medal from the University of Queensland in 1968 and completed his PhD in Economics at the Australian National University in 1972. He has held academic appointments at institutions including the University of Rochester, University of Sydney, and University of Melbourne, with visiting positions at Princeton University, Yale University, Johns Hopkins University, and University of Oxford (Nuffield College). He is a Fellow of the Econometric Society and the Academy of the Social Sciences in Australia.

We look forward to your participation in this insightful research seminar.

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