How Robust Are the Policy Conclusions of the St. Louis Equation?: Some Further Evidence

N a previous issue of this Review, we pn-ovided some evidence that the policy conclusions of the St. Louis equation an-c robust with respect to both the specification of its lag structure and the imposition of polynomial restn-ictions: monetary policy has a significant long-run effect on aggn-egate income, while fscal policy does not.’ This result is imnportant because it provides evidence that these policy conclusions an-c not dependent on the equation’s econometric specification, a subject of continued debate since the equation fin-st appeared. This conclusion, however, was based on the use of only one technique — developed by Pagano and Han’tley 11981)— for selecting the appropriate lag stnuctun-e amid polynomial degree. Consequently, the general sensitivity of the policy conclusions to the specification of lag lengths and polvnomnial degnees remains an issine.