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A Semistructural Methodology for Policy Counterfactuals

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  • Martin Beraja

Abstract

I propose a methodology for constructing counterfactuals with respect to changes in policy rules that does not require fully specifying a particular model yet is not subject to Lucas critique. It applies to a class of dynamic stochastic models whose equilibria are well approximated by a linear representation. It rests on the insight that many such models satisfy a principle of counterfactual equivalence: they are observationally equivalent under a benchmark policy and yield an identical counterfactual equilibrium under an alternative one.

Suggested Citation

  • Martin Beraja, 2023. "A Semistructural Methodology for Policy Counterfactuals," Journal of Political Economy, University of Chicago Press, vol. 131(1), pages 190-201.
    • Handle: RePEc:ucp:jpolec:doi:10.1086/720982
    DOI: 10.1086/720982
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    Cited by:

    1. 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.

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