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Why Does Data Reject the Lucas Critique

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  • Roger E. A. Farmer

Abstract

This paper examines the consequences for macroeconomic theory of the Favero-Hendry finding that the Lucas critique of econometric policy evaluation is rejected by the data. l revisit the idea that this failure may be explained by models with indeterminate equilibria and l develop a class of expectations rules that l call generalized adaptive expectations. l illustrate how these rules may be implemented in a series of examples.

Suggested Citation

  • Roger E. A. Farmer, 2002. "Why Does Data Reject the Lucas Critique," Annals of Economics and Statistics, GENES, issue 67-68, pages 111-129.
    • Handle: RePEc:adr:anecst:y:2002:i:67-68:p:111-129
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