Working Paper: NBER ID: w1448
Authors: Lawrence H. Summers
Abstract: 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.
Keywords: interest rates; inflation; Fisher effect; econometric techniques
JEL Codes: E31; E43
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Interest rates (E43) | Inflation (E31) |
| Inflation (E31) | Interest rates (E43) |
| Expected inflation (E31) | Fisher effect (E43) |
| Actual inflation (E31) | Expected inflation (E31) |
| Lagged inflation (E31) | Expected inflation (E31) |