Global Sensitivity Analysis in Economic Modelling

Modelling activities are steadily increasing in all economic fields, particulalry in policy impact assessments. Sensitivity analysis is crucial both in the modelling phase and in the interpretation of model results, as in economic simulations, results often hinge on values for key exogenous parameters. The values of these parameters are often not known precisely (for example, they may have been econometrically estimated) and we wish to know how variations in the values of these parameters affect model results. Hence, Sensitivity analysis contributes importantly to model development, model calibration, model validation, reliability and robustness analysis, decision-making under uncertainty, quality-assurance, and model reduction. The present paper reviews the literature and proposes a generalised approach for performing global sensitivity analysis in economic modelling.