Post hoc ergo propter once more an evaluation of 'does monetary policy matter?' in the spirit of James Tobin
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Christina and David Romer's paper 'Does Monetary Policy Matter?' advocates the so-called 'narrative' approach to causal inference. We demonstrate that this method will not sustain causal inference. First, it is impossible to distinguish monetary shocks from oil shocks as causes of recessions. Second, a world in which the Fed only announces intentions to act cannot be distinguished from one in which it in fact acts. Third, the techniques of dynamic simulation used in the Romers' study are inappropriate and quantitatively misleading. And, finally, their approach provides no basis for establishing causal asymmetry. © 1994.
Published Version (Please cite this version)10.1016/0304-3932(94)01149-4
Publication InfoHoover, KD; & Perez, SJ (1994). Post hoc ergo propter once more an evaluation of 'does monetary policy matter?' in the spirit of James Tobin. Journal of Monetary Economics, 34(1). pp. 47-74. 10.1016/0304-3932(94)01149-4. Retrieved from https://hdl.handle.net/10161/1981.
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Professor of Economics
Professor Hoover's research interests include macroeconomics, monetary economics, the history of economics, and the philosophy and methodology of empirical economics. His recent work in economics has focused on the application of causal search methodologies for structural vector autoregression, the history of microfoundational programs in macroeconomics, and Roy Harrod's early work on dynamic macroeconomics. In philosophy, he has concentrated on issues related to causality, especially in economi