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Monday, March 9, 2009

The answers aren't so clear

For the first time in my life, I'm trying to review all of the literature on a particular topic (for the article critique, for Macro). I hardly know where to start. The article is on the question of whether we should worry about the possibility of natural rates (of inflation, interest, growth etc) varying over time instead of being constant, as is often assumed. This is an interesting question, and it would warrant looking at the literature on natural rates, how they're used, how widely, whether they are in fact assumed to be constant, and whether anyone else has done this sort of work on different data, or for different variables. That in itself is plenty for the measly 1000 words we have to work within.

But then there are questions outside the central thesis of the article. The author uses a new Keynesian macro model for his analysis. Am I to examine whether this is a good type of model to use? If so, should I be looking at the merits of using other models in general, or just for the specific purpose of investigating natural rate variation? What if there's no natural rate literature that uses any other type of model?

The model he uses, also, isn't truly micro-founded. Should that come into my critique too? Do I need to find an example of natural rate work which uses a micro-founded model? If there is none, do I bring my vast inexperience and ineptitude to bear on the question myself? (Surely not in 1000 words.) Or will I be lucky enough to find a micro-founded model which can give rise to the structural equations used in the article at hand?

Then there's the question of methodology. The author uses something called Bayesian estimation. I don't know what that is, although I could find out. But do I need to compare it to other estimation methods? I don't know any other estimation methods (apart from OLS). Do I need to learn a vast amount of graduate-level econometrics for the purpose of this critique? Or should I just look for papers that use other estimation techniques? How can I say whether the technique used in one paper is preferable to that used in another paper without understanding, really, what the differences are?

Finally, what mix of textbooks, reviews/commentary, and original research should I be looking at? On what databases and in what journals will I find the materials I need? How do I know that the stuff I'm turning up in the library isn't complete rubbish?

At some point I'll ask Prof A Macro about some of this, but first I have to sort my questions into some semblance of order. It would probably help if I did some actual work on it, too, before going to the prof.

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