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  3. American Economic Review
  4. September 2001
  5. Testing for the Lucas Critique: A Quantitative Investigation

American Economic Review

ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)

Testing for the Lucas Critique: A Quantitative Investigation

  • Jesper Linde
American Economic Review
vol. 91, no. 4, September 2001
(pp. 986–1005)
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Abstract

In this paper, I try to shed some new light on the "puzzle" of why the Lucas critique, believed to be important by most economists, seems to have received very little empirical support. I use a real-business-cycle model to verify that the Lucas critique is quantitatively important in theory, and 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 superexogeneity test is not capable of detecting the relevance of the Lucas critique in practice in small samples.

Citation

Linde, Jesper. 2001. "Testing for the Lucas Critique: A Quantitative Investigation." American Economic Review, 91 (4): 986–1005. DOI: 10.1257/aer.91.4.986

JEL Classification

  • C53 Forecasting and Other Model Applications
  • E52 Monetary Policy
  • E41 Demand for Money