Journal of Political Economy Vol. 88 No. 3 1980
Simultaneous-Equations Tests of the Natural Rate and Other Classical Hypotheses
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.
- DOI
- 10.1086/260885
- Volume
- 88
- Issue
- 3
- Pages
- 539-549
- Language
- en
- Sources
- openalex crossref