SUMMARY Estimates of the effect of different international monetary regimes on the parameters of the Phillips curve, the Keynesian consumption function, and other reduced-form macroeconomic relationships are given. The estimates provide a quantitative assessment of the importance of the Lucas critique for such regime shifts. The estimates are calculated by stochastically simulating an estimated multicountry economic model with rational expectations under a fixed exchange rate regime and a flexible exchange rate regime. In both regimes interest rates are the primary instrument of monetary policy. Noticeable shifts occur in most of the macroeconomic relationships, especially in the consumption function and the Phillips curve, and these shifts have simple economic interpretations based on the changes in the variance and the serial correlation of income and prices in the two regimes. However, in most cases the shifts are not large quantitatively. At least, as implemented here, this type of regime shift does not seem to generate much instability in the conventional macroeconomic relationships. Several possible reasons for this finding are discussed in the paper. In this paper I plan to follow in a tradition pioneered by A. W. Phillips almost 40 years ago. Phillips (1954) evaluated monetary and fiscal policy by examining the operating properties of simple policy rules in a fully specified economic model. He did this by applying control theory ideas from the engineering literature. By examining the performance of the model economy under different types of policy rules-for example, proportional, derivative, and integral rules-he attempted to determine which policy rule would work well and which would not work well in practice. Following in the Phillips tradition does not mean that I will use the same theoretical models, econometric methods, or computational techniques that Phillips used. To do so would, in my view, pass by fundamental developments in dynamic economic theory, econometrics, and solution procedures that have been achieved since the time that Phillips wrote. Phillip's (1954) analysis was based on Keynesian ISLM-multiplier-accelerator models that were popular in the early 1950s. The policy evaluation I describe in this lecture differs from Phillips's policy evaluation in several ways. First, it makes use of a dynamic rational expectations model with forward-looking behaviour in consumption, investment, wage-setting, and interest rates. Second, the model is international and exchange rate determination reflects the current high degree of international capital mobility which did not exist when Phillips wrote. Third, the model is empirically estimated; most of Phillips's work was based on simulation models with 'calibrated' parameters. Fourth, the simulations are done stochastically with an empirically