IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Are taste and technology parameters stable? a test of "deep" parameter stability in real business cycle models of the U.S. economy

  • Daniel G. Swaine
Registered author(s):

    Lucas (1976) criticized Keynesian models because of parametric instability. For many economists, the "Lucas critique" provided a reason to replace the Keynesian approach with equilibrium models of the business cycle. One example of the equilibrium approach is the Real Business Cycle (RBC) model. However, RBC models have not been subjected to the same scrutiny of tests of parameter instability. We present a prototypical RBC model and subject it to structural change tests. Our results document evidence of extensive parameter instability. Thus, the "Lucas critique" is applicable and we conclude that the single representative agent class of RBC models has an invalid structural form.>

    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://www.bostonfed.org/economic/wp/wp2001/wp015.htm
    Download Restriction: no

    File URL: http://www.bostonfed.org/economic/wp/wp2001/wp015.pdf
    Download Restriction: no

    Paper provided by Federal Reserve Bank of Boston in its series Working Papers with number 01-05.

    as
    in new window

    Length:
    Date of creation: 2001
    Date of revision:
    Handle: RePEc:fip:fedbwp:01-05
    Contact details of provider: Postal: 600 Atlantic Avenue, Boston, Massachusetts 02210
    Phone: 617-973-3397
    Fax: 617-973-4221
    Web page: http://www.bos.frb.org/
    Email:


    More information through EDIRC

    Order Information: Email:


    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. Lewbel, Arthur, 1989. "Exact Aggregation and a Representative Consumer," The Quarterly Journal of Economics, MIT Press, vol. 104(3), pages 621-33, August.
    2. Lawrence J. Christiano & Martin Eichenbaum, 1990. "Current real business cycle theories and aggregate labor market fluctuations," Working Paper Series, Macroeconomic Issues 90, Federal Reserve Bank of Chicago.
    3. Hall, Robert E, 1988. "Intertemporal Substitution in Consumption," Journal of Political Economy, University of Chicago Press, vol. 96(2), pages 339-57, April.
    4. Mishkin, Frederic S, 1995. "Nonstationarity of Regressors and Tests on Real-Interest-Rate Behavior," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(1), pages 47-51, January.
    5. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November.
    6. Alan P. Kirman, 1992. "Whom or What Does the Representative Individual Represent?," Journal of Economic Perspectives, American Economic Association, vol. 6(2), pages 117-136, Spring.
    7. Donald W.K. Andrews, 1990. "Tests for Parameter Instability and Structural Change with Unknown Change Point," Cowles Foundation Discussion Papers 943, Cowles Foundation for Research in Economics, Yale University.
    8. Stock, James H & Watson, Mark W, 1993. "A Simple Estimator of Cointegrating Vectors in Higher Order Integrated Systems," Econometrica, Econometric Society, vol. 61(4), pages 783-820, July.
    9. Browning, Martin, 1991. "A Simple Nonadditive Preference Structure for Models of Household Behavior over Time," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 607-37, June.
    10. James B. Bullard, 1994. "Measures of money and the quantity theory," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 19-30.
    11. Harcourt, G C, 1969. "Some Cambridge Controversies in the Theory of Capital," Journal of Economic Literature, American Economic Association, vol. 7(2), pages 369-405, June.
    12. Craig Burnside & Martin Eichenbaum & Sergio Rebelo, 1990. "Labor Hoarding and the Business Cycle," NBER Working Papers 3556, National Bureau of Economic Research, Inc.
    13. Berndt, Ernst R & Darrough, Masako N & Diewert, W E, 1977. "Flexible Functional Forms and Expenditure Distributions: An Application to Canadian Consumer Demand Functions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 18(3), pages 651-75, October.
    14. Saikkonen, Pentti & Ripatti, Antti, 1999. "On the Estimation of Euler Equations in the Presence of a Potential Regime Shift," Research Discussion Papers 6/1999, Bank of Finland.
    15. Sumru Altug, 1986. "Time to build and aggregate fluctuations: some new evidence," Working Papers 277, Federal Reserve Bank of Minneapolis.
    16. Oliner, Stephen D. & Rudebusch, Glenn D. & Sichel, Daniel, 1996. "The Lucas critique revisited assessing the stability of empirical Euler equations for investment," Journal of Econometrics, Elsevier, vol. 70(1), pages 291-316, January.
    17. Long, John B, Jr & Plosser, Charles I, 1983. "Real Business Cycles," Journal of Political Economy, University of Chicago Press, vol. 91(1), pages 39-69, February.
    18. Perron, P. & Bai, J., 1995. "Estimating and Testing Linear Models with Multiple Structural Changes," Cahiers de recherche 9552, Universite de Montreal, Departement de sciences economiques.
    19. Lawrence J. Christiano & Terry J. Fitzgerald, 1999. "The Band pass filter," Working Paper 9906, Federal Reserve Bank of Cleveland.
      • Lawrence J. Christiano & Terry J. Fitzgerald, 2003. "The Band Pass Filter," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(2), pages 435-465, 05.
    20. Burnside, Craig & Eichenbaum, Martin, 1996. "Factor-Hoarding and the Propagation of Business-Cycle Shocks," American Economic Review, American Economic Association, vol. 86(5), pages 1154-74, December.
    21. McGrattan, Ellen R., 1994. "The macroeconomic effects of distortionary taxation," Journal of Monetary Economics, Elsevier, vol. 33(3), pages 573-601, June.
    22. Muellbauer, John, 1975. "Aggregation, Income Distribution and Consumer Demand," Review of Economic Studies, Wiley Blackwell, vol. 42(4), pages 525-43, October.
    23. Brock, William A. & Mirman, Leonard J., 1972. "Optimal economic growth and uncertainty: The discounted case," Journal of Economic Theory, Elsevier, vol. 4(3), pages 479-513, June.
    24. Christensen, Laurits R & Jorgenson, Dale W & Lau, Lawrence J, 1975. "Transcendental Logarithmic Utility Functions," American Economic Review, American Economic Association, vol. 65(3), pages 367-83, June.
    25. Muellbauer, John, 1976. "Community Preferences and the Representative Consumer," Econometrica, Econometric Society, vol. 44(5), pages 979-99, September.
    26. Tjalling C. Koopmans, 1963. "On the Concept of Optimal Economic Growth," Cowles Foundation Discussion Papers 163, Cowles Foundation for Research in Economics, Yale University.
    27. Ghysels, Eric & Hall, Alastair, 1990. "Are consumption-based intertemporal capital asset pricing models structural?," Journal of Econometrics, Elsevier, vol. 45(1-2), pages 121-139.
    28. King, Robert G. & Plosser, Charles I. & Rebelo, Sergio T., 1988. "Production, growth and business cycles : I. The basic neoclassical model," Journal of Monetary Economics, Elsevier, vol. 21(2-3), pages 195-232.
    29. McGrattan, Ellen R & Rogerson, Richard & Wright, Randall, 1997. "An Equilibrium Model of the Business Cycle with Household Production and Fiscal Policy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(2), pages 267-90, May.
    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:fip:fedbwp:01-05. 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: (Catherine Spozio)

    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.