Using the reduced form equation of the St. Louis Fed's monetarist macroeconomic model, we examine the sensitivity of monetary and fiscal policy elasticity estimates to the empirical estimation technique, to the assumed lengths of policy lags, and. to the time period studied. The empirical results are not very sensitive to the first two factors, but the results are quite sensitive to the time period examined. Two plausible explanations for the divergent results are considered and examined and the implications of the divergent results for the usefulness of the St. Louis model is discussed •
federal reserve bank, model, reliability, policy lags, monetary policy, fiscal policy
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Bonello, Frank J. and Reichenstein, William R., "The sensitivity of policy elasticities to the time period examined in the St. Louis equation and other tests." (1981). Working Papers. 20.