Estimating the long-run relationship between interest rates and inflation: A response to McCallum
This note demonstrates that Bennett McCallum's recent critique of low frequency estimates of macro-economic relationships is of little empirical significance. It also demonstrates that readily available and frequently used techniques can be used to diagnose the problem McCallum raises. Finally, it shows that the standard critique of expectational distributed lags is not warranted once the role of learning by economic agents is recognized.
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References listed on IDEAS
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- Martin Feldstein & Lawrence Summers, 1983.
"Inflation, Tax Rules, and the Long-term Interest Rate,"
NBER Chapters,in: Inflation, Tax Rules, and Capital Formation, pages 153-185
National Bureau of Economic Research, Inc.
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