IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Monetary Policy Analysis in Backward-Looking Models

  • Jesper Linde

    (Sveriges Riksbank)

In this paper, I use a dynamic general equilibrium model to quantify how sensitive a typical backward-looking model used in monetary policy analysis is to the Lucas critique. The results show that the backward-looking model exhibit significant parameter instability that is economically important, but that a standard econometric test for detecting this instability fails to do so accurately in small samples. These findings suggest that the relative merits of alternative monetary policy rules should be checked in an equilibrium framework.

(This abstract was borrowed from another version of this item.)

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://fmwww.bc.edu/RePEc/es2000/1028.pdf
File Function: main text
Download Restriction: no

Paper provided by Econometric Society in its series Econometric Society World Congress 2000 Contributed Papers with number 1028.

as
in new window

Length:
Date of creation: 01 Aug 2000
Date of revision:
Handle: RePEc:ecm:wc2000:1028
Contact details of provider: Phone: 1 212 998 3820
Fax: 1 212 995 4487
Web page: http://www.econometricsociety.org/pastmeetings.asp
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Filippo Altissimo & Stefano Siviero & Daniele Terlizzese, 2002. "How Deep are the Deep Parameters?," Annals of Economics and Statistics, GENES, issue 67-68, pages 207-226.
  2. Clarida, Richard & Galí, Jordi & Gertler, Mark, 1998. "Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory," CEPR Discussion Papers 1908, C.E.P.R. Discussion Papers.
  3. Rudebusch, G.D. & Svensson, L.E.O., 1998. "Policy Rules for Inflation Targeting," Papers 637, Stockholm - International Economic Studies.
  4. Eric M. Leeper & Tao Zha, 2003. "Modest policy interventions," FRB Atlanta Working Paper 2003-24, Federal Reserve Bank of Atlanta.
  5. Jeff Fuhrer & Arturo Estrella, 1999. "Are 'Deep' Parameters Stable? The Lucas Critique as an Empirical Hypothesis," Computing in Economics and Finance 1999 621, Society for Computational Economics.
  6. Christiano, Lawrence J. & Eichenbaum, Martin & Evans, Charles L., 1999. "Monetary policy shocks: What have we learned and to what end?," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 2, pages 65-148 Elsevier.
  7. ENGLE, Robert F. & HENDRY, David F. & RICHARD, Jean-François, . "Exogeneity," CORE Discussion Papers RP 516, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Engle, Robert F & Hendry, David F & Richard, Jean-Francois, 1983. "Exogeneity," Econometrica, Econometric Society, vol. 51(2), pages 277-304, March.
  8. Svensson, L-E-O, 1996. "Inflation Forecast Targeting : Implementaing and Monitoring Inflation Targets," Papers 615, Stockholm - International Economic Studies.
  9. Bennett T. McCallum & Edward Nelson, 2000. "Nominal Income Targeting in an Open-Economy Optimizing Model," NBER Working Papers 6675, National Bureau of Economic Research, Inc.
  10. Laurence Ball, 1997. "Efficient Rules for Monetary Policy," NBER Working Papers 5952, National Bureau of Economic Research, Inc.
  11. Cooley, T.F. & Hansen, G.D., 1988. "The Inflation Tax In A Real Business Cycle Model," RCER Working Papers 155, University of Rochester - Center for Economic Research (RCER).
  12. Hansen, Gary D., 1985. "Indivisible labor and the business cycle," Journal of Monetary Economics, Elsevier, vol. 16(3), pages 309-327, November.
  13. Bennett T. McCallum, 1984. "Monetarist Rules in the Light of Recent Experience," NBER Working Papers 1277, National Bureau of Economic Research, Inc.
  14. Lucas, Robert E., 1977. "Understanding business cycles," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 5(1), pages 7-29, January.
  15. Taylor, John B., 1998. "The Robustness and Efficiency of Monetary Policy Rules as Guidelines for Interest Rate Setting by the European Central Bank," Seminar Papers 649, Stockholm University, Institute for International Economic Studies.
  16. Lindé, Jesper, 2000. "Testing for the Lucas Critique: A Quantitative Investigation," Working Paper Series 113, Sveriges Riksbank (Central Bank of Sweden).
  17. Gary D. Hansen & Edward C. Prescott, 1992. "Recursive methods for computing equilibria of business cycle models," Discussion Paper / Institute for Empirical Macroeconomics 36, Federal Reserve Bank of Minneapolis.
  18. Favero, C. & Hendry, D., 1990. "Testing The Lucas Critique: A Review," Economics Series Working Papers 99101, University of Oxford, Department of Economics.
  19. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
  20. Mccallum, Bennet T., 1988. "Robustness properties of a rule for monetary policy," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 29(1), pages 173-203, January.
  21. Fregert, Klas & Jonung, Lars, 1998. "Monetary Regimes And Endogenous Wage Contracts: Sweden 1908-1995," Working Papers 1998:3, Lund University, Department of Economics, revised 21 Apr 1999.
  22. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 195-214, December.
  23. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November.
  24. Geweke, John, 1985. "Macroeconometric Modeling and the Theory of the Representative Agent," American Economic Review, American Economic Association, vol. 75(2), pages 206-10, May.
  25. Neil R. Ericsson & John S. Irons, 1995. "The Lucas critique in practice: theory without measurement," International Finance Discussion Papers 506, Board of Governors of the Federal Reserve System (U.S.).
  26. Lucas, Robert E, Jr, 1975. "An Equilibrium Model of the Business Cycle," Journal of Political Economy, University of Chicago Press, vol. 83(6), pages 1113-44, December.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:ecm:wc2000:1028. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.