Simultaneous-Equations Tests of the Natural Rate and Other Classical Hypotheses

John T. Cuddington

23 citations0/0 files storedJournal of Political Economy

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Monetary Policy and Economic Impact Economic Theory and Policy Economic theories and models

Abstract

This paper tests the fundamental implication of classical stochastic macroeconomic models à la Sargent-Lucas, namely, that conditional means of real variables are invariant with respect to monetary and fiscal policy. Using a multiple-equations technique to examine U.S. data from 1952:II to 1972:III, the classical hypothesis (which includes the natural-rate hypothesis) is rejected. While such evidence does not completely rule out the possibility of classical behavior by the economy, it provides some reassurance for those predisposed toward policy activism.

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2010Investigating Causal Relations by Econometric Models and Cross-Spectral Methods 1972MONEY, INCOME, AND CAUSALITY 1973Some International Evidence on Output-Inflation Tradeoffs.1976A Classical Macroeconometric Model for the United States 1978Testing the exogeneity specification in the complete dynamic simultaneous equation model 1978A little bit of evidence on the natural rate hypothesis from the U.S.

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1983Money-income causality: Results for six countries 1988A keynesian macro‐econometric model of the UK: 1955–1984

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