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Minimize regulations to regulate -- Extending the Lucas Critique

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  • Marjit, Sugata
  • Biswas, Amit K.
  • Beladi, Hamid

Abstract

Lucas [Lucas, Robert, E., Jr. (1976), "Econometric Policy Evaluation: A Critique", Carnegie-Rochester Conference Series on Public Policy, 1, pp 19-46] had argued that interventionist macroeconomics policies may fail because policies themselves affect the optimal behaviour of private agents and hence the associated response parameters. We extend Lucas argument and propose that highly controlled and regulated environment leads to misinterpretation of official statistics and therefore distort policy predictions based on such information. In a way policies will have predictability in a more open and less regulated environment.

Suggested Citation

  • Marjit, Sugata & Biswas, Amit K. & Beladi, Hamid, 2008. "Minimize regulations to regulate -- Extending the Lucas Critique," Economic Modelling, Elsevier, vol. 25(4), pages 623-627, July.
    • Handle: RePEc:eee:ecmode:v:25:y:2008:i:4:p:623-627
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    References listed on IDEAS

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    1. Jesper Linde, 2001. "Testing for the Lucas Critique: A Quantitative Investigation," American Economic Review, American Economic Association, vol. 91(4), pages 986-1005, September.
    2. Fuhrer, Jeffrey C, 1997. "The (Un)Importance of Forward-Looking Behavior in Price Specifications," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(3), pages 338-350, August.
    3. Srinivasan, T. N., 1973. "Tax evasion: A model," Journal of Public Economics, Elsevier, vol. 2(4), pages 339-346.
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    5. Laurence Ball, 1999. "Efficient Rules for Monetary Policy," International Finance, Wiley Blackwell, vol. 2(1), pages 63-83, April.
    6. Brian Erard & Jonathan S. Feinstein, 1994. "Honesty and Evasion in the Tax Compliance Game," RAND Journal of Economics, The RAND Corporation, vol. 25(1), pages 1-19, Spring.
    7. Allingham, Michael G. & Sandmo, Agnar, 1972. "Income tax evasion: a theoretical analysis," Journal of Public Economics, Elsevier, vol. 1(3-4), pages 323-338, November.
    8. Biswas, Rongili & Marjit, Sugata, 2008. "Distributive manipulations and political stability: A theoretical analysis," International Review of Economics & Finance, Elsevier, vol. 17(4), pages 618-628, October.
    9. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
    10. Yitzhaki, Shlomo, 1974. "Income tax evasion: A theoretical analysis," Journal of Public Economics, Elsevier, vol. 3(2), pages 201-202, May.
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    Cited by:

    1. Subhasish Das & Amit K. Biswas, 2021. "Trade Mis-Invoicing Between India & USA: An Empirical Exercise," Foreign Trade Review, , vol. 56(1), pages 7-30, February.
    2. Samir Kumer Das & Amit K. Biswas, 2023. "Trade Data Falsification and Informal Capita Movement: A Study of Bangladesh with Major Asian Trade Partners," Foreign Trade Review, , vol. 58(4), pages 467-483, November.

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    More about this item

    JEL classification:

    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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