The Lucas Critique in Practice: Theory Without Measurement
Abstract
This paper investigates the empirical relevance of the Lucas critique. A database is constructed of all articles in the Social Science Citation Index that cite Lucas (1976). Those articles are characterized by the nature of the article, the context in which Lucas (1976) is cited, and the evidence presented on the Lucas critique. Virtually no evidence exists that empirically substantiates the Lucas critique. Empirical refutation of the Lucas critique by using tests of super exogeneity is illustrated with U.K. money demand. Numerous other studies similarly refute the Lucas critique for various empirical macro-economic relations.
Abstract This paper investigates the empirical relevance of the Lucas critique. A database is constructed of all articles in the Social Science Citation Index that cite Lucas (1976). Those articles are characterized by the nature of the article, the context in which Lucas (1976) is cited, and the evidence presented on the Lucas critique. Virtually no evidence exists that empirically substantiates the Lucas critique. Empirical refutation of the Lucas critique by using tests of super exogeneity is illustrated with U.K. money demand. Numerous other studies similarly refute the Lucas critique for various empirical macro-economic relations. Key words and phrases: conditional models, error correction, exo geneity, expectations, invariance, Lucas (1976), Lucas critique, marginal models, money demand, parameter constancy, policy, regime switches.
Cite this document
Neil R. Ericsson and John S. Irons (1995). The Lucas Critique in Practice: Theory Without Measurement (IFDP 1995-506). Board of Governors of the Federal Reserve System, International Finance Discussion Papers. https://whenthefedspeaks.com/doc/ifdp_1995-506
@techreport{wtfs_ifdp_1995_506,
author = {Neil R. Ericsson and John S. Irons},
title = {The Lucas Critique in Practice: Theory Without Measurement},
type = {International Finance Discussion Papers},
number = {1995-506},
institution = {Board of Governors of the Federal Reserve System},
year = {1995},
url = {https://whenthefedspeaks.com/doc/ifdp_1995-506},
abstract = {This paper investigates the empirical relevance of the Lucas critique. A database is constructed of all articles in the Social Science Citation Index that cite Lucas (1976). Those articles are characterized by the nature of the article, the context in which Lucas (1976) is cited, and the evidence presented on the Lucas critique. Virtually no evidence exists that empirically substantiates the Lucas critique. Empirical refutation of the Lucas critique by using tests of super exogeneity is illustrated with U.K. money demand. Numerous other studies similarly refute the Lucas critique for various empirical macro-economic relations.},
}