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Structural Inference and the Lucas Critique

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  • Fabrice COLLARD
  • Patrick FEVE
  • François LANGOT

Abstract

We develop a structural model that aims at characterizing a set of restrictions allowing for a statistical evaluation of the effect of changes in monetary policy rules on aggregate dynamics at business cycle frequency. Standard econometric tools are first used to reveal and estimate changes in monetary policy rules over two sub-samples. We then test the ability of our model to match a set of moments summarizing the distribution of the data over the two sub-samples. We find that --holding the deep parameters of the model (preferences and technology) constant-- monetary policy parameters adjust to match the data, therefore illustrating the empirical relevance of the Lucas critique.

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Bibliographic Info

Article provided by ENSAE in its journal Annals of Economics and Statistics.

Volume (Year): (2002)
Issue (Month): 67-68 ()
Pages: 183-206

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Handle: RePEc:adr:anecst:y:2002:i:67-68:p:08

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Cited by:
  1. Mojon, Benoît & Angeloni, Ignazio & Terlizzese, Daniele & Kashyap, Anil K., 2003. "The output composition puzzle: a difference in the monetary transmission mechanism in the euro area and U.S," Working Paper Series, European Central Bank 0268, European Central Bank.
  2. Beatriz de-Blas-Pérez, 2004. "Can Financial Frictions Help Explain The Performance Of The Us Fed?," Economics Working Papers, Universidad Carlos III, Departamento de Economía we044517, Universidad Carlos III, Departamento de Economía.
  3. Pierre-Yves HENIN & Marie PODEVIN, 2002. "Assessing the Effects of Policy Changes: Lesson from the European 1992 Experience," Annales d'Economie et de Statistique, ENSAE, ENSAE, issue 67-68, pages 435-461.
  4. Liu, Yuelin & Morley, James, 2014. "Structural evolution of the postwar U.S. economy," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 42(C), pages 50-68.
  5. Libero Monteforte & Stefano Siviero, 2002. "The economic consequences of euro area modelling shortcuts," Temi di discussione (Economic working papers), Bank of Italy, Economic Research and International Relations Area 458, Bank of Italy, Economic Research and International Relations Area.
  6. Thomas A. Lubik & Paolo Surico, 2010. "The Lucas critique and the stability of empirical models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 25(1), pages 177-194.
  7. Stefano Siviero & Daniele Terlizzese & Ignazio Visco, 1999. "Are model-based inflation forecasts used in monetary policymaking? A case study," Temi di discussione (Economic working papers), Bank of Italy, Economic Research and International Relations Area 357, Bank of Italy, Economic Research and International Relations Area.

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