Empirical Macroeconomics in a Policy Context: The Fed-MIT-Penn Model versus the St. Louis Model, 1965–75

The Keynesian and Monetarist debate of the 1960s and 1970s has been mainly reconstructed starting from the contributions of leading Keynesian economists, on the one side, and Milton Friedman on the other. Even if the empirical character of the controversy has been recognized, the role played by macroeconometric models has been little investigated. This article enlarges the perspective looking at the interactions between monetary economists outside and within the Federal Reserve System, through the building of the Fed-MIT-Penn large-scale econometric model, and the St. Louis reduced-form model. The models’ empirical results were instrumental to theoretical and policy discussions, while the use of different statistical approaches involved methodological dispute and partly anticipated most of the issues central in the late 1970s.