IDEAS home Printed from https://ideas.repec.org/p/fip/fedmsr/109.html
   My bibliography  Save this paper

The quantitative significance of the Lucas critique

Author

Listed:
  • Preston J. Miller
  • William Roberds

Abstract

Doan, Litterman, and Sims (DLS) have suggested using conditional forecasts to do policy analysis with Bayesian vector autoregression (BVAR) models. Their method seems to violate the Lucas critique, which implies that coefficients of a BVAR model will change when there is a change in policy rules. In this paper we construct a BVAR macro model and attempt to determine whether the Lucas critique is important quantitatively. We find evidence following two candidate policy rule changes of significant coefficient instability and of a deterioration in the performance of the DLS method.

Suggested Citation

  • Preston J. Miller & William Roberds, 1987. "The quantitative significance of the Lucas critique," Staff Report 109, Federal Reserve Bank of Minneapolis.
    • Handle: RePEc:fip:fedmsr:109
    as

    Download full text from publisher

    File URL: http://www.minneapolisfed.org/research/common/pub_detail.cfm?pb_autonum_id=390
    Download Restriction: no
    File URL: http://minneapolisfed.org/research/sr/sr109.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Preston J. Miller & William Roberds, 1992. "How little we know about deficit policy effects," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 16(Win), pages 2-11.
    2. David E. Runkle, 1989. "The U.S. economy in 1990 and 1991: continued expansion likely," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 13(Fall), pages 19-26.
    3. Daniel M. Chin & John Geweke & Preston J. Miller, 2000. "Predicting turning points," Staff Report 267, Federal Reserve Bank of Minneapolis.
    4. Leeper, Eric M. & Zha, Tao, 2003. "Modest policy interventions," Journal of Monetary Economics, Elsevier, vol. 50(8), pages 1673-1700, November.
    5. Daniel F. Waggoner & Tao Zha, 1999. "Conditional Forecasts In Dynamic Multivariate Models," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 639-651, November.
    6. Dan Chin & John Geweke & Preston Miller, 2000. "Predicting Turning Points: Technical Paper 2000-3," Working Papers 13337, Congressional Budget Office.
    7. Preston J. Miller & Richard M. Todd, 1992. "Real effects of monetary policy in a world economy," Staff Report 154, Federal Reserve Bank of Minneapolis.
    8. Arturo Estrella & Jeffrey C. Fuhrer, 2003. "Monetary Policy Shifts and the Stability of Monetary Policy Models," The Review of Economics and Statistics, MIT Press, vol. 85(1), pages 94-104, February.
    9. Miller, Preston J. & Todd, Richard M., 1995. "Real effects of monetary policy in a world economy," Journal of Economic Dynamics and Control, Elsevier, vol. 19(1-2), pages 125-153.
    10. Preston J. Miller & David E. Runkle, 1989. "The U.S. economy in 1989 and 1990: walking a fine line," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 13(Win), pages 3-10.
    11. Freeman, John R., 1996. "A Computable Equilibrium Model for the Study of Political Economy," Bulletins 7484, University of Minnesota, Economic Development Center.
    12. Preston J. Miller & William Roberds, 1989. "How little we know about budget policy effects," FRB Atlanta Working Paper 89-4, Federal Reserve Bank of Atlanta.
    13. repec:adr:anecst:y:2002:i:67-68:p:16 is not listed on IDEAS

    More about this item

    Keywords

    Vector autoregression; Forecasting;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedmsr:109. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kate Hansel (email available below). General contact details of provider: https://edirc.repec.org/data/cfrbmus.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.