New Keynesian modeling adequately addresses the Lucas critique
While New Keynesian DSGE models incorporate microfoundations and forward-looking behavior intended to surmount the Lucas critique, critics and empirical assessments highlight ongoing structural instabilities and discrepancies with real-world data.
The claim addresses whether New Keynesian modeling adequately solves the Lucas critique. Paper [0] and [10] (in part) discuss how forward-looking structures and optimizations attempt to meet this challenge, while Paper [7] and the empirical residuals in [10] reflect ongoing critiques regarding structural stability and predictive failure in mainstream macroeconomics.
The evidence we hold leans evenly split
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official record 3x · fact-check 2x · hedged 1x · crowd & reference 1x
- Assessing the Lucas Critique in Monetary Policy Models · peer-reviewed · supports · weight 1.05 · 2004
- New Keynesian Optimal-Policy Models: An Empirical Assessment · peer-reviewed · supports · weight 1 · 2004
- Robert Boyer, Une discipline sans réflexivité peut-elle être · peer-reviewed · refutes · weight 1 · 2023
- New Keynesian Optimal-Policy Models: An Empirical Assessment · peer-reviewed · refutes · weight 1 · 2004
Glenn D. Rudebusch. Assessing the Lucas Critique in Monetary Policy Models. 2004. https://doi.org/10.2139/ssrn.549501
Paper [0] demonstrates that forward-looking macroeconomic specifications are relatively insensitive to policy shifts, offering a reconciliation with reduced-form stability that addresses aspects of the Lucas critique.
Yamada T. Robert Boyer, Une discipline sans réflexivité peut-elle être une science? Epistémologie de l’économie : Editions de la Sorbonne, 2021. 2023. https://europepmc.org/article/PMC/PMC10035967
Paper [7] critiques mainstream macroeconomics, including its microfounded DSGE approaches, for losing relevance with observations and failing to adequately model changing socioeconomic regimes.
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Richard Dennis. New Keynesian Optimal-Policy Models: An Empirical Assessment. 2004. https://doi.org/10.2139/ssrn.550441
Paper [10] estimates optimization-based sticky-price New Keynesian models to assess their empirical fit, showing how structural parameters can be evaluated under policy rules.
Richard Dennis. New Keynesian Optimal-Policy Models: An Empirical Assessment. 2004. https://doi.org/10.2139/ssrn.550441
Paper [10] notes that even the best-fitting New Keynesian specification displays characteristics and empirical failures that remain inconsistent with actual data.
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