Using a simple model, we show why previous empirical studies of budget policy effects are flawed. Due to an identification problem, those studies’ findings can be shown to be consistent with either policies mattering or not.

This paper considers a policy environment in which policy is not set by a single policymaker, but by a sequence of policymaking administrations. Administration turnover is determined by a simple random process. The consequences of administration turnover are traced through for two versions of a...

Methods are presented for solving a certain class of rational expectations models, principally those that arise from dynamic games. The methods allow for numerical solution using spectral factorization algorithms and for estimation of these models using maximum likelihood techniques.

The consequences of a straightforward monetary targeting scheme are examined for a simple dynamic macro model. The notion of “targeting” used is the strategic one introduced by Rogoff (1985). Numerical calculations are used to demonstrate that for the model under consideration, monetary...

Doan, Litterman, and Sims (DLS) have suggested using conditional forecasts to do policy analysis with Bayesian vector autoregression (BVAR) models. Their method seems to violate the Lucas critique, which implies that coefficients of a BVAR model will change when there is a change in policy...