Most macromodels are, in fact, face the test map.
Discussion Papers in Economics HE ON FROM (University of Surrey) (University of Surrey) Department of Economics University of Surrey Guildford Surrey GU2 7XH, UK Telephone +44 (0)1483 689380 Facsimile +44 (0)1483 689548 Web www.econ.surrey.ac.uk ISSN: 1749-5075 T CREDIBILITY PROBLEM REVISITED: THIRTY YEARS KYDLAND AND PRESCOTT By Paul Levine Joseph Pearlman (London Metropolitan … The Lucas Critique: Estimated functional forms obtained for macroeconomic models in the Keynesian tradition (e.g. 0000001724 00000 n To him, economic fluctuations are largely the effects of shocks in competitive markets with completely flexible wages and prices. 174 New Keynesian Microfoundations Revisited: A Calvo-Taylor-Rule-of-Thumb Model and Optimal Monetary Policy Delegation Richard Mash Department of Economics and New College University of Oxford October 2003 An earlier version of this paper was presented at the Econometric Society North American Summer …
dynamic IS-LM models) are not deep because these models do not correctly take into account the dependence of private agent behavior on perceived or 2Since the term \structural" already has many other meanings in economics and econometrics, henceforth only the term \deep" will be …
In contrast to what Mr. Pinzon-Fuchs suggests, however, I do not start with this proposition nor do I aim at proving it.
(1985). 0000001078 00000 n Discussion of the Lucas critique often involves the need to model in terms of ‘deep’ parameters. stream
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For example, when the author asserts that the Lucas Critique was a “devastating attack on the […] common approach to macroeconometric modelling” (p. 2); that the critique was “convincing” and “successful,” and that macroeconomic models had “achieve[d] consistency” (p. 3) thanks to the Lucas Critique. Indeed, the author refers to Keynes’s (1937) paper as the major source to understand this concept, and yet Keynes does not thoroughly develop this concept in that particular piece.
Timing: new policy today or tomorrow.
The author’s uncritical acceptance of the standard narrative is revealed at different points in the paper. ECONOMETRIC POEICY EVALUATION: A CRITIQUE Robert E. Lucas, Jr. 1. However, the really serious point here is that Lucas's answer to his own solution to his own critique should be subjected to his own critique. The answer is yes, of course. Therefore, although I very much endorse the idea of a holistic approach to the history of the Lucas critique, I think it justified to start with “the `standard narrative’ of the history of macroeconomics built by Robert Lucas himself and by other practitioners of macroeconomics” (Mr. Pinzon-Fuchs). The irrelevance of existing macro-Econometric Models for policy evaluation.
Some important references in this sense are Lawson (1985a; 1985b) and Carabelli (1988).2)The author presents the Lucas Critique in an over-optimistic and uncritical way.
According to the reviewer, the key deficit of the paper is a lack of sufficient discussion of its main proposition.
Trivially yes if the model aims to forecast through policy rule changes.Bro, for those kind of models, I use a simple heuristic. Macroeconomic Advisors et.
0000006777 00000 n The paper draft will be amended by adding explanation and corrections according to the above discussion. al. The author argues that DRE would take the Lucas Critique to another level, since the rational expectations (RE) framework would be applied not only to a particular model based on which economic agents build their expectations about the consequences of particular policies but also to the problem of how agents select a particular model among others in the first place. I think that the author’s proposition needs to be thoroughly researched and discussed and that, to do so, the author should study and refer to Keynes (1921) as well as to the secondary literature that also focuses on Keynes’s ideas on uncertainty and probability. OXFORD UNIVERSITY DEPARTMENT OF ECONOMICS DISCUSSION PAPER NO. Rv*��>�@MR7���B'@1�uc��uw ���Cug�=� It does not follow, however, that the discovery and the description of the problem itself is unimportant.
0000005124 00000 n 0000006033 00000 n 0000002965 00000 n 25 0 obj More formally, it states that the decision rules of Keynesian models—such as the consumption function—cannot be considered as structural in the sense of being invariant with respect to changes in government policy variables. Introduction Tile fact that nominal prices and wages tend to rise more rapidly at tile peak of the business cycle than they do in the trough has been well recognized from the time when tile cycle was first perceived as a distinct phenomenon. A history of conflicting positions,” in Duarte and Lima (eds.)
,�6��H�͍�J�������G$X�Zk�K�]�H9+�ɋ[�*yͽ��t��+� T��P؊�|�#?mS8݅�M�uFx-D|����w �D34�u��ﶬ���H�oTQ�U���V���#v���z#�? Of course this analogy is wrong in the trivial sense that all analogies are wrong, but also it's "more wrong" in the sense that you cannot quantify the Lucas critique the same you can quantify OVB, even if you have the true model. – The abstract is incomplete and should be revised.
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