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Testing for the Lucas Critique: A Quantitative Investigation

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  • Lindé, Jesper

    (Research Department, Central Bank of Sweden)

Abstract

In this paper, I try to shed some new light on the "puzzle" why the Lucas critique, belived to be important by most economists, seems to have received very little empirical support. I use a real business cycle model to examine the properties of the super exogeneity test, which is used to detect the applicability of the Lucas critique in practice. The results suggest that the super exogeneity test is not capable of detecting the relevance of Lucas critique in practice in small samples.

Suggested Citation

  • Lindé, Jesper, 2000. "Testing for the Lucas Critique: A Quantitative Investigation," Working Paper Series 113, Sveriges Riksbank (Central Bank of Sweden).
    • Handle: RePEc:hhs:rbnkwp:0113
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    References listed on IDEAS

    as
    1. Engle, Robert F. & Hendry, David F., 1993. "Testing superexogeneity and invariance in regression models," Journal of Econometrics, Elsevier, vol. 56(1-2), pages 119-139, March.
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    More about this item

    Keywords

    Lucas critique; Real business cycle model; Super exogeneity test; Taylor rules; Money demand; Consumption function;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money

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