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The Cowles Commission approach, real business cycles theories, and New- Keynesian economics

  • Ray C. Fair
  • Arnold Zellner (ary)

The Cowles Commission approach is reviewed and compared to the approaches of real business cycle (RBC) theorists and new Keynesian economists. It is argued that RBC models are not tested in a serious enough way and that the new Keynesian literature is not empirical enough for testing even to be a serious possibility. Macroeconomics seems to be moving away from its traditional empirical basis, which is sad. This paper argues for returning to the path that was abandoned by most macroeconomists around 1970, namely the specification and testing of structural macroeconometric models.

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Article provided by Federal Reserve Bank of St. Louis in its journal Proceedings.

Volume (Year): (1992)
Issue (Month): ()
Pages: 133-157

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Handle: RePEc:fip:fedlpr:y:1992:p:133-157
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  1. Russell Davidson & James G. MacKinnon, 1980. "Several Tests for Model Specification in the Presence of Alternative Hypotheses," Working Papers 378, Queen's University, Department of Economics.
  2. Fair, Ray C & Shiller, Robert J, 1990. "Comparing Information in Forecasts from Econometric Models," American Economic Review, American Economic Association, vol. 80(3), pages 375-89, June.
  3. Laidler, David & Bentley, Brian, 1983. "A Small Macro-Model of the Post-War United States," The Manchester School of Economic & Social Studies, University of Manchester, vol. 51(4), pages 317-40, December.
  4. Fair, Ray C, 1980. "Estimating the Expected Predictive Accuracy of Econometric Models," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 21(2), pages 355-78, June.
  5. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July.
  6. Barro, Robert J., 1978. "Unanticipated Money, Output, and the Price Level in the United States," Scholarly Articles 3450988, Harvard University Department of Economics.
  7. Lawrence J. Christiano & Martin Eichenbaum, 1990. "Current real business cycle theories and aggregate labor market fluctuations," Discussion Paper / Institute for Empirical Macroeconomics 24, Federal Reserve Bank of Minneapolis.
  8. Fair, Ray C & Taylor, John B, 1983. "Solution and Maximum Likelihood Estimation of Dynamic Nonlinear Rational Expectations Models," Econometrica, Econometric Society, vol. 51(4), pages 1169-85, July.
  9. Spencer Krane & Steven Braun, 1990. "Production smoothing evidence from physical-product data," Working Paper Series / Economic Activity Section 103, Board of Governors of the Federal Reserve System (U.S.).
  10. Altug, Sumru, 1989. "Time-to-Build and Aggregate Fluctuations: Some New Evidence," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(4), pages 889-920, November.
  11. Chow, G.C., 1993. "Statistical Estimation and Testing of a Real Business Cycle Model," Papers 365, Princeton, Department of Economics - Econometric Research Program.
  12. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November.
  13. David Laidler & Ben S. Bernanke (ary), 1992. "The cycle before new-classical economics," Proceedings, Federal Reserve Bank of St. Louis, pages 85-117.
  14. Hansen, Lars Peter & Singleton, Kenneth J, 1982. "Generalized Instrumental Variables Estimation of Nonlinear Rational Expectations Models," Econometrica, Econometric Society, vol. 50(5), pages 1269-86, September.
  15. Hendry, David F. & Richard, Jean-Francois, 1982. "On the formulation of empirical models in dynamic econometrics," Journal of Econometrics, Elsevier, vol. 20(1), pages 3-33, October.
  16. repec:bla:restud:v:53:y:1986:i:4:p:671-90 is not listed on IDEAS
  17. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
  18. MacKinnon, James G. & White, Halbert & Davidson, Russell, 1983. "Tests for model specification in the presence of alternative hypotheses : Some further results," Journal of Econometrics, Elsevier, vol. 21(1), pages 53-70, January.
  19. Hall, Robert E, 1978. "Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 971-87, December.
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