LaS ERHAPS Andy's most impor-tant and lasting contribution to the economics pnofession was his r-eseam-ch with Jerry Jom-dan that mesulted in the publication of the Andersen-Jordan (A-Jl equation on', as it is more widely known, the St. Louis equation. Almost immediately, the two found their-wor'k the subject of intense c-r-iticismn and contr'over-sy -mmmcli of which continues, though in tones that am-c significantly muted.'While the criticisms of Andersen-Jom-dan wer-e focused on various technical and applied econometric aspects of their work, they wer-e motivated, in lan-ge part, by A-J's conclusion that monetary policy has a significant and lasting effect on nominal GNP and that fiscal policy has no lasting effect. These results conflicted sharply not only with the conventional wisdom about the relative effects of monetary and fiscal policy actions but with the results of large-scale econometric models of the time.The ptrrpose of this paper is to r-eview the cn-iticisms that emer'ged following the publication of the A-J equation.< We note that many, if not all, of the cr-iticisms of the A-J paper-apply equally well to the vast majority of published research, then arid now. More importantly, using the original A-J data, we find no evidence to suppor-t these cn-iticisms. 'The monetary-fiscal policy debate was actually initiated prior to Andersen-Jordan (1968) by Friedman and Meiselman (1963). Just as the ensuing debate surrounding Friedman and Meiselman's results was waning, however, Andersen and Jordan appeared, rekindling and intensifying the disagreement over the relative efficacy of monetary and fiscal policies. 2 While our review differs from recent ones by McCallum (1986) and Meyer and Rasche (1980), it is necessary to traverse some of the ground they covered. Recently, Cooley and LeRoy (19811 have ar-gued that a close cor-respondence tends to exist between the advocacy of a theory and the r-esults of scientific investigation. It is not sum-prising, therefon'e, that when two known and vocal proponents of monetarism r-epon-ted empirical r-esults that strongly suppom-ted monetarst propositions, the results were received with skepticism, which was intensified by theim-use of a single, "n-educed-for-ni" equation. Critics were suspicious that A-i inadvertently had either-misspecified the model or used faulty econometric techniques to obtain their results.' Three major criticisms emerged following the ptrblication of the A-J equation. Fir-si, it was ar-gtred than the equation was misspecified because impon'tant exogenous, r-ight-hand-side variables had been excluded. Second, critics claimed that A-J's use of on-dinany least squares (OLS) had resulted in sinrultaneotms equation bias. Finally, it was asserted that A-J had failed to identify the relevant exogenous indicator-s of monetary and fiscal policy actions. tmr addition, critics wene concerned that the A-J m'esolts were sample-specific or not robust to various econometn-rc modifications, including their use of Almnon's (1965) polynomial distmibuted lag es...
