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Practical policy evaluation

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  • Kocherlakota, Narayana R.

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.

Suggested Citation

  • Kocherlakota, Narayana R., 2019. "Practical policy evaluation," Journal of Monetary Economics, Elsevier, vol. 102(C), pages 29-45.
    • Handle: RePEc:eee:moneco:v:102:y:2019:i:c:p:29-45
    DOI: 10.1016/j.jmoneco.2019.01.009
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    Cited by:

    1. Degasperi,Riccardo & Hong, Seokki Simon & Ricco, Giovanni, 2020. "The Global Transmission of U.S. Monetary Policy," The Warwick Economics Research Paper Series (TWERPS) 1257, University of Warwick, Department of Economics.
    2. Chemla, Gilles & Hennessy, Christopher A., 2020. "Rational expectations and the Paradox of policy-relevant natural experiments," Journal of Monetary Economics, Elsevier, vol. 114(C), pages 368-381.
    3. Alisdair McKay & Christian K. Wolf, 2023. "What Can Time‐Series Regressions Tell Us About Policy Counterfactuals?," Econometrica, Econometric Society, vol. 91(5), pages 1695-1725, September.
    4. Hennessy, Christopher A. & Livdan, Dmitry, 2021. "Learning, parameter drift, and the credibility revolution," Journal of Monetary Economics, Elsevier, vol. 117(C), pages 395-417.
    5. T. Minina I. & V. Skalkin V. & Т. Минина И. & В. Скалкин В., 2019. "Уменьшение рисков финансового сектора для обеспечении устойчивого роста экономики России // Reducing the Risks of the Financial Sector to Ensure Sustainable Growth of the Russian Еconomy," Экономика. Налоги. Право // Economics, taxes & law, ФГОБУ "Финансовый университет при Правительстве Российской Федерации" // Financial University under The Government of Russian Federation, vol. 12(3), pages 86-92.

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    More about this item

    Keywords

    Lucas Critique; Macroeconomic policy; Dynamic games; Macroeconometrics;
    All these keywords.

    JEL classification:

    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General

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