NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Cowles Commission Approach, Real Business Cycle Theories, and New Keynesian Economics

Ray C. Fair

NBER Working Paper No. 3990
Issued in February 1992
NBER Program(s):   EFG

The Cowles Commission approach is reviewed and compared to the approaches of real business cycle (RBC) theorists and new Keynesian economists. It is argued that RBC models are not tested in a serious enough way and that the new Keynesian literature is not empirical enough for testing even to be a serious possibility. Macroeconomics seems to be moving away from its traditional empirical basis, which is sad. This paper argues for returning to the path that was abandoned by most macroeconomists around 1970, namely the specification and testing of structural macroeconometric models.

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Document Object Identifier (DOI): 10.3386/w3990

Published: The Business Cycles: Theories and Evidence, (Proceedings of the Sixteenth Annual Economic Policy Conference of the Federal Reserve Bank of St. Louis), edited by Michael T. Belognia and Michelle R. Garfinkel, pp. 133-147, Norwell, MA: Kluwer Academic Publishers, 1992

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