Flawed Estimation of Policy Rules Could Lead to Misguided Economic Advice
The article looks at how accurately we can estimate simple policy rules in economics. Researchers analyze different methods used to estimate these rules and point out problems with how they are evaluated. They find that some rules may be wrongly estimated or chosen. By simulating a model, they show that extra variables can mistakenly appear in the estimation results. The length of the data sample or errors in real-time data don't seem to affect the outcomes significantly.