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Practical policy evaluation

Narayana Kocherlakota ()

Journal of Monetary Economics, 2019, vol. 102, issue C, 29-45

Abstract: In the wake of the Lucas (1976), the study of appropriate macroeconomic policy has largely focused on the comparison of different regimes/rules. In practice, few policymakers are faced with making those kinds of choices. I examine the problem of a policymaker making but one in a sequence of similar decisions. My main result is that the policymaker’s optimal response to the current state can be found by applying regression methods to past macroeconomic data. I argue that macroeconomic policy evaluation intended to be of practical value should rely less on putatively structural macroeconomic models and more on regression-based approaches.

Keywords: Lucas Critique; Macroeconomic policy; Dynamic games; Macroeconometrics (search for similar items in EconPapers)
JEL-codes: E60 (search for similar items in EconPapers)
Date: 2019
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