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The Cowles Commission Approach, Real Business Cycle Theories, and New Keynesian Economics

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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File URL: http://cowles.econ.yale.edu/P/cd/d10a/d1004.pdf
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Paper provided by Cowles Foundation for Research in Economics, Yale University in its series Cowles Foundation Discussion Papers with number 1004.

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Length: 22 pages
Date of creation: Feb 1992
Date of revision:
Publication status: Published in Michael T. Belongia and Michelle R. Garfinkel, eds., The Business Cycle: Theories and Evidence, 1992, pp. 133-147
Handle: RePEc:cwl:cwldpp:1004
Note: CFP 821.
Contact details of provider: Postal: Yale University, Box 208281, New Haven, CT 06520-8281 USA
Phone: (203) 432-3702
Fax: (203) 432-6167
Web page: http://cowles.econ.yale.edu/

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Order Information: Postal: Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA

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  1. Barro, Robert J., 1978. "Unanticipated Money, Output, and the Price Level in the United States," Scholarly Articles 3450988, Harvard University Department of Economics.
  2. Chong, Yock Y & Hendry, David F, 1986. "Econometric Evaluation of Linear Macro-Economic Models," Review of Economic Studies, Wiley Blackwell, vol. 53(4), pages 671-90, August.
  3. Russell Davidson & James G. MacKinnon, 1981. "Tests for Model Specification in the Presence of Alternative Hypotheses: Some Further Results," Working Papers 430, Queen's University, Department of Economics.
  4. David Laidler & Ben S. Bernanke (ary), 1992. "The cycle before new-classical economics," Proceedings, Federal Reserve Bank of St. Louis, pages 85-117.
  5. 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.
  6. Chow, G.C., 1993. "Statistical Estimation and Testing of a Real Business Cycle Model," Papers 365, Princeton, Department of Economics - Econometric Research Program.
  7. Ray C. Fair & John B. Taylor, 1980. "Solution and Maximum Likelihood Estimation of Dynamic Nonlinear RationalExpectations Models," NBER Technical Working Papers 0005, National Bureau of Economic Research, Inc.
  8. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November.
  9. 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.
  10. HENRY, David F. & RICHARD, Jean-François, . "On the formulation of empirical models in dynamic econometrics," CORE Discussion Papers RP -502, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  11. 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.
  12. 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.).
  13. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
  14. 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.
  15. 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.
  16. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July.
  17. Ray C. Fair, 1978. "Estimating the Expected Predictive Accuracy of Econometric Models," Cowles Foundation Discussion Papers 480, Cowles Foundation for Research in Economics, Yale University.
  18. 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.
  19. 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.
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