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Data Analysis Ahead of Theory
Almost everybody agrees that we need to rethink macro. Of course, there is very little agreement about what that rethinking will involve. Predictably, there is a strong desire on part of the "mainstream" to cordon off the debate, to assert that it is all in there in the mainstream papers, we just need to rediscover them. I propose a different approach. A moratorium on macro theory, at least for now. A little over 30 years ago, Ed Prescott, proclaimed that business cycle theory was ahead of measurement. Although he said it because the data kept rejecting his pet theories, he was probably right about macro data, ... (full story)