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The Lucas critique in practice: theory without measurement

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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.

Suggested Citation

  • Neil R. Ericsson & John S. Irons, 1995. "The Lucas critique in practice: theory without measurement," International Finance Discussion Papers 506, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgif:506
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    References listed on IDEAS

    as
    1. Sargent, Thomas J, 1976. "A Classical Macroeconometric Model for the United States," Journal of Political Economy, University of Chicago Press, vol. 84(2), pages 207-237, April.
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    13. Cuthbertson, Keith, 1991. "The Encompassing Implications of Feedforward versus Feedback Mechanisms: A Reply," Oxford Economic Papers, Oxford University Press, vol. 43(2), pages 344-350, April.
    14. LaHaye, Laura, 1985. "Inflation and Currency Reform," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 537-560, June.
    15. Milton Friedman & Anna J. Schwartz, 1982. "Monetary Trends in the United States and United Kingdom: Their Relation to Income, Prices, and Interest Rates, 1867–1975," NBER Books, National Bureau of Economic Research, Inc, number frie82-2, February.
    16. Hendry, David F. & Ericsson, Neil R., 1991. "Modeling the demand for narrow money in the United Kingdom and the United States," European Economic Review, Elsevier, vol. 35(4), pages 833-881, May.
    17. Ghysels, Eric & Hall, Alastair, 1990. "Are consumption-based intertemporal capital asset pricing models structural?," Journal of Econometrics, Elsevier, vol. 45(1-2), pages 121-139.
    18. Judd, John P & Scadding, John L, 1982. "The Search for a Stable Money Demand Function: A Survey of the Post-1973 Literature," Journal of Economic Literature, American Economic Association, vol. 20(3), pages 993-1023, September.
    19. Engle, Robert F. & Hendry, David F., 1993. "Testing superexogeneity and invariance in regression models," Journal of Econometrics, Elsevier, vol. 56(1-2), pages 119-139, March.
    20. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-1580, November.
    21. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    22. Gordon, Robert J., 1976. "Can econometric policy evaluations be salvaged? -- A comment," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 47-61, January.
    23. Ericsson, Neil R., 1992. "Parameter constancy, mean square forecast errors, and measuring forecast performance: An exposition, extensions, and illustration," Journal of Policy Modeling, Elsevier, vol. 14(4), pages 465-495, August.
    24. George A. Akerlof & Ross D. Milbourne, 1980. "Irving Fisher on His Head II: The Consequences of the Timing of Payments for the Demand for Money," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 95(1), pages 145-157.
    25. Kremers, Jeroen J M & Ericsson, Neil R & Dolado, Juan J, 1992. "The Power of Cointegration Tests," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 325-348, August.
    26. Neil R. Ericsson & Steven B. Kamin, 1993. "Dollarization in Argentina," International Finance Discussion Papers 460, Board of Governors of the Federal Reserve System (U.S.).
    27. C.A. Favero & D.F. Hendry, 1989. "Testing the Lucas Critique: A Review," Working Papers 212, Queen Mary University of London, School of Economics and Finance.
    28. Johansen, Soren, 1992. "Cointegration in partial systems and the efficiency of single-equation analysis," Journal of Econometrics, Elsevier, vol. 52(3), pages 389-402, June.
    29. Julia Campos & Neil R. Ericsson, 1988. "Econometric modeling of consumers' expenditure in Venezuela," International Finance Discussion Papers 325, Board of Governors of the Federal Reserve System (U.S.).
    30. Hendry, David F & Ericsson, Neil R, 1991. "An Econometric Analysis of U.K. Money Demand in 'Monetary Trends in the United States and the United Kingdom' by Milton Friedman and Anna Schwartz," American Economic Review, American Economic Association, vol. 81(1), pages 8-38, March.
    31. Alan S. Blinder, 1988. "The Fall and Rise of Keynesian Economics," The Economic Record, The Economic Society of Australia, vol. 64(4), pages 278-294, December.
    32. Osterwald-Lenum, Michael, 1992. "A Note with Quantiles of the Asymptotic Distribution of the Maximum Likelihood Cointegration Rank Test Statistics," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 461-472, August.
    33. George A. Akerlof, 1979. "Irving Fisher on his Head: The Consequences of Constant Threshold-Target Monitoring of Money Holdings," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 93(2), pages 169-187.
    34. Hansen, Bruce E., 1992. "Testing for parameter instability in linear models," Journal of Policy Modeling, Elsevier, vol. 14(4), pages 517-533, August.
    35. Laband, David N & Piette, Michael J, 1994. "The Relative Impacts of Economics Journals: 1970-1990," Journal of Economic Literature, American Economic Association, vol. 32(2), pages 640-666, June.
    36. Milbourne, Ross, 1983. "Optimal Money Holding under Uncertainty," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 24(3), pages 685-698, October.
    37. Neftci, Salih & Sargent, Thomas J., 1978. "A little bit of evidence on the natural rate hypothesis from the U.S," Journal of Monetary Economics, Elsevier, vol. 4(2), pages 315-319, April.
    38. McNelis, Paul D & Neftci, Salih N, 1982. "Policy-Dependent Parameters in the Presence of Optimal Learning: An Application of Kalman Filtering to the Fair and Sargent Supply-Side Equations," The Review of Economics and Statistics, MIT Press, vol. 64(2), pages 296-306, May.
    39. King, Robert G., 1988. "Money demand in the United States: A quantitative review," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 29(1), pages 169-172, January.
    40. Hendry, David F, 1988. "The Encompassing Implications of Feedback versus Feedforward Mechanisms in Econometrics," Oxford Economic Papers, Oxford University Press, vol. 40(1), pages 132-149, March.
    41. Peek, Joe & Wilcox, James A, 1987. "Monetary Policy Regimes and the Reduced Form for Interest Rates," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 19(3), pages 273-291, August.
    42. Yoshihisa Baba & David F. Hendry & Ross M. Starr, 1992. "The Demand for M1 in the U.S.A., 1960–1988," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 59(1), pages 25-61.
    43. repec:bla:ecorec:v:64:y:1988:i:187:p:278-94 is not listed on IDEAS
    44. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
    45. Johansen, Søren & Juselius, Katarina, 1992. "Testing structural hypotheses in a multivariate cointegration analysis of the PPP and the UIP for UK," Journal of Econometrics, Elsevier, vol. 53(1-3), pages 211-244.
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    Full references (including those not matched with items on IDEAS)

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