Premium
International Evidence on the Stability of the Optimizing IS Equation *
Author(s) -
Kara Amit,
Nelson Edward
Publication year - 2004
Publication title -
oxford bulletin of economics and statistics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.131
H-Index - 73
eISSN - 1468-0084
pISSN - 0305-9049
DOI - 10.1111/j.1468-0084.2004.00098.x
Subject(s) - stability (learning theory) , work (physics) , simultaneous equations model , economics , sample (material) , econometrics , empirical evidence , mathematical economics , macroeconomics , computer science , thermodynamics , physics , philosophy , epistemology , machine learning
We provide international evidence on the issue of whether the optimizing IS equation is more stable than a backward‐looking alternative. This evidence consists of estimates of IS equations on quarterly data for the UK and Australia, both for the full sample of the last 40 years and for the period following major monetary policy shifts in 1979–80. Results suggest the parameters in the optimizing IS equations are more empirically stable than those of the backward‐looking alternative. The use of dynamic general equilibrium modelling in empirical work does deliver material benefits, in the form of equations more suitable for policy analysis.