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American Economic Review: Vol. 91 No. 4 (September 2001)
AER Volume. 91, Issue 4 | 
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Testing for the Lucas Critique: A Quantitative Investigation
Article 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
DOI: 10.1257/aer.91.4.986
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.
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Authors
Linde, Jesper (Sveriges Riksbank)
JEL Classifications
C53: Forecasting and Other Model Applications
E52: Monetary Policy
E41: Demand for Money
E52: Monetary Policy
E41: Demand for Money
