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International Finance Discussion Papers
The International Finance Discussion Papers logo links to the International Finance Discussion Papers home page A Forward-Looking Multicountry Model: MX3
Joseph E. Gagnon
1989-359  (August 1989)

Abstract:  This is paper discusses the theoretical structure and empirical properties of MX3, a multicountry macroeconometric model with rational expectations. MX3 is a medium-sized quarterly model of the United States, Japan, and West Germany. The primary objective of the model is to analyze the effect of fiscal and monetary rules on national economies in an international context. By incorporating rational expectations into almost all of the model's behavioral equations, MX3 takes a large step toward addressing the "Lucas critique" of model-based policy analysis.

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