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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Citations: View citations in EconPapers (2)

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Working Paper: Practical Policy Evaluation (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:102:y:2019:i:c:p:29-45

DOI: 10.1016/j.jmoneco.2019.01.009

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