This paper was published with no issue number.

This paper was published with no issue number.

This paper was published with no issue number.

Simultaneously published as part of the Ninth District Economic Information Series.

A speech delivered to the Marketing Research Seminar for Gas Utilities, sponsored by the American Gas Association, October 2, 1969.

The 1972 version of WP9 was published as part of the Ninth District Economic Series.

The 1972 version of WP9 was published as part of the Ninth District Economic Series.

A statistical definition of the natural unemployment rate hypothesis is advanced and tested. A particular illustrative structural macroeconomic model satisfying the definition is set forth and estimated. The model has "classical" policy implications, implying a number of neutrality propositions asserting the invariance of the conditional means of real variables with respect to the feedback rule for the money supply. The aim is to test how emphatically the data reject a model incorporating rather severe "classical" hypotheses.

Note from cover: "Developed from remarks at the Chamber of Commerce sponsored seminar for the International Tariff Commission hearings on February 20, 1975 Minneapolis, Minnesota."

This paper puts forward a method for improving the forecasting accuracy of an existing macroeconometric model without changing its policy response characteristics. The procedure is an extension and formalization of the practice of additive adjustments currently used by most forecasters. The method should be of special interest to forecasters who use models built by other investigators because it does not involve reestimation of the original model and uses only information routinely included in the documentation available to model users. The paper ends with a demonstration of the prediction improvement realized by application of this method to a version of the MIT-Penn-SSRC (MPS) model.

This paper puts forward a method for simulating an existing macroeconometric model while maintaining the additional assumption that individuals form their expectations rationally. This simulation technique is a first response to Lucas' criticism that standard econometric policy evaluation allows policy rules to change but doesn't allow expectations rules to change as economic theory predicts they will. The technique is applied to a version of the St. Louis Federal Reserve Model with interesting results. The rational expectations version of the St. Louis Model exhibits the same neutrality with respect to certain policy rules as small, analytic rational expectations models considered by Lucas, Sargent, and Wallace.