Practical policy evaluation

In the wake of the Lucas (1976), the study of appropriate macroeconomic policy has largely focused on the comparison of different regimes/rules. In practice, few policymakers are faced with making those kinds of choices. I examine the problem of a policymaker making but one in a sequence of similar decisions. My main result is that the policymaker's optimal response to the current state can be found by applying regression methods to past macroeconomic data. I argue that macroeconomic policy evaluation intended to be of practical value should rely less on putatively structural macroeconomic models and more on regression-based approaches.