"The Keynesian econometric methodology developed by Klein and associates was criticized by Lucas in his 1976 “Critique of Econometric Policy Evaluation” on the grounds that microfounded structural equations should contain expectations of future variables. Since the parameters of these expectations should depend on the parameters of the rules followed by the policy authorities, Lucas argued that the rational expectations assumption would invalidate the practice of using fixed parameter models as policy guides. The profession responded to the Lucas critique in two different ways. The first, introduced to economists in the book Rational Expectations and Econometric Practice, was to develop appropriate econometric methods to estimate parameters in rational expectations environments. The second, explained most clearly in Kydland and Prescott’s (1996) article, “The Computational Experiment,” was to develop a new methodology,calibration, that lowered the standards of what it means for a model to be successful by requiring that a good model should explain only a limited set of empirical moments."
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Academics from the United StatesNobel laureates from the United StatesEconomists from the United StatesPeople from Washington (state)Nobel laureates in Economics
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, Expectations, Employment and Prices, Ch. 5 A New Way to Understand Business Cycle Facts
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Robert Lucas Jr.
Robert Emerson Lucas, Jr. (September 15, 1937 – May 15, 2023) was an American economist at the , who received the Nobel Prize in Economics in 1995. He is widely regarded as the central figure in the development of the new classical approach to macroeconomics.
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