A Sufficient Statistics Approach for Macro Policy Evaluation

Geert Mesters and Régis Barnichon

No 1171, Working Papers from Barcelona School of Economics

Abstract: The evaluation of macroeconomic policy decisions has traditionally relied on the formulation of a specific economic model. In this work, we show that two statistics are sufficient to detect, often even correct, non-optimal policies, i.e., policies that do not minimize the loss function. The two sufficient statistics are (i) the effects of policy shocks on the policy objectives, and (ii) forecasts for the policy objectives conditional on the policy decision. Both statistics can be estimated without relying on a specific model. We illustrate the method by studying US monetary policy decisions.

Keywords: forecasting; impulse responses; optimal policy (search for similar items in EconPapers)
JEL-codes: C14 C32 E32 E52 (search for similar items in EconPapers)
Date: 2020-04
New Economics Papers: this item is included in nep-cba, nep-ecm and nep-mac
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Working Paper: A Sufficient Statistics Approach for Macro Policy Evaluation (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:bge:wpaper:1171

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