Estimating the Long-Run Relationship between Interest Rates and Inflation: a Response to Mccallum
14 Pages Posted: 27 Apr 2000 Last revised: 30 Jan 2002
Date Written: September 1984
This note demonstrates that Bennett McCallum's recent critique of low frequency estimates of macro-economic relationships is of little empirical significance. It also demonstrates that readily available and frequently used techniques can be used to diagnose the problem McCallum raises. Finally, it shows that the standard critique of expectational distributed lags is not warranted once the role of learning by economic agents is recognized.
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