Should-Read: Marco Fioramanti and Robert Waldman: Econometrics and its consequences for human beings: "The Stability and Growth Pact: The European Commission is currently evaluating compliance with the Stability and Growth Pact...
...However, differences in the econometric methods used by member states and by the Commission can lead to estimates that are at odds. This column argues that the Commission’s method of estimating the non-accelerating wage rate of unemployment for Eurozone members, which relies on an accelerationist Phillips curve, is inferior to specifications with a traditional Phillips curve. The findings highlight how technical aspects of an estimation procedure can have serious effects on policy outcomes.
