Monetary Policy Shifts and the Stability of Monetary Policy Models
Arturo Estrella and
Jeffrey Fuhrer ()
The Review of Economics and Statistics, 2003, vol. 85, issue 1, 94-104
Since the publication (1976) of the classic Lucas critique, researchers in empirical macroeconomics have endeavored to specify models that capture the underlying dynamic decision-making behavior of consumers and firms who require forecasts of future events. Recently, a number of researchers have developed simple models that have become the workhorses for monetary policy analysis. The models vary considerably with regard to optimizing foundations and explicit treatment of expectations. However, relatively little effort has been devoted to testing the empirical importance of the Lucas critique for these simple models. Can one find specifications that are policy-invariant? This paper develops and implements a set of tests for several monetary policy models used extensively in the literature. In particular, we attempt to test the robustness of optimizing versus nonoptimizing models to changes in the monetary policy regime. We present evidence that shows that some forward-looking models from the recent literature may be less stable than their better-fitting backward-looking counterparts. © 2003 President and Fellows of Harvard College and the Massachusetts Institute of Technology.
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (97) Track citations by RSS feed
Downloads: (external link)
http://www.mitpressjournals.org/doi/pdf/10.1162/003465303762687730 link to full text (application/pdf)
Access to full text is restricted to subscribers.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:tpr:restat:v:85:y:2003:i:1:p:94-104
Ordering information: This journal article can be ordered from
https://mitpressjour ... rnal/?issn=0034-6535
Access Statistics for this article
The Review of Economics and Statistics is currently edited by Pierre Azoulay, Olivier Coibion, Will Dobbie, Raymond Fisman, Benjamin R. Handel, Brian A. Jacob, Kareen Rozen, Xiaoxia Shi, Tavneet Suri and Yi Xu
More articles in The Review of Economics and Statistics from MIT Press
Bibliographic data for series maintained by Ann Olson ().