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July/August 2001, 
Vol. 83, No. 4
Posted 2001-07-01

Assessing Simple Policy Rules: A View from a Complete Macroeconomic Model

by Eric M. Leeper and Tao Zha

The authors argue, and demonstrate in several ways, that it is treacherous to draw inferences about policy effects solely from policy rules estimated in isolation from a complete macro model. System estimates of policy parameters can differ substantially from single-equation estimates. And system properties do not align well with values of particular policy parameters.