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Estimating the Long-Run Relationship Between Interest Rates and Inflation: A Response to McCallum

  • Lawrence H. Summers

This note demonstrates that Bennett McCallum's recent critique of low frequency estimates of macro-economic relationships is of little empirical significance. It also demonstrates that readily available and frequently used techniques can be used to diagnose the problem McCallum raises. Finally, it shows that the standard critique of expectational distributed lags is not warranted once the role of learning by economic agents is recognized.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1448.

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Date of creation: Sep 1984
Date of revision:
Publication status: published as Summers, Lawrence H. "Estimating the Long-Run Relationship between Interest Rates and Inflation." From Journal of Monetary Economics, Vol. 18, No. 1, pp. 77-86, (July 1986).
Handle: RePEc:nbr:nberwo:1448
Note: EFG ME
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  1. Martin Feldstein & Lawrence Summers, 1983. "Inflation, Tax Rules, and the Long-term Interest Rate," NBER Chapters, in: Inflation, Tax Rules, and Capital Formation, pages 153-185 National Bureau of Economic Research, Inc.
  2. McCallum, Bennett T, 1976. "Rational Expectations and the Natural Rate Hypothesis: Some Consistent Estimates," Econometrica, Econometric Society, vol. 44(1), pages 43-52, January.
  3. R. F. Engle, 1972. "Band Spectrum Regressions," Working papers 96, Massachusetts Institute of Technology (MIT), Department of Economics.
  4. Sargent, Thomas J, 1971. "A Note on the 'Accelerationist' Controversy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 3(3), pages 721-25, August.
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