Journal of Political Economy Vol. 131 No. 1 2023
A Semistructural Methodology for Policy Counterfactuals
Abstract
I propose a methodology for constructing counterfactuals with respect to changes in policy rules that does not require fully specifying a particular model yet is not subject to Lucas critique. It applies to a class of dynamic stochastic models whose equilibria are well approximated by a linear representation. It rests on the insight that many such models satisfy a principle of counterfactual equivalence: they are observationally equivalent under a benchmark policy and yield an identical counterfactual equilibrium under an alternative one.
- DOI
- 10.1086/720982
- Volume
- 131
- Issue
- 1
- Pages
- 190-201
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref