Critique and consequence

Journal of Monetary Economics, 2024, vol. 141, issue C, 2-13

Abstract: After describing the landscape in macroeconomics and econometrics in Spring 1973 when Robert E. Lucas (1976) first presented his Critique at the inaugural Carnegie-Rochester conference, I add a fourth example based on Sargent and Wallace (1973) to those in section 5 of Lucas’s paper. To portray consequences of Lucas’s Critique, I use it as a vehicle to describe the time inconsistency of optimal plans and their credibility. A theory of government policy affects chains of influence among money creation and inflation rates at different dates. Different theories of policy bring different state vectors in recursive representations of inflation-money-supply outcomes.

Keywords: Rational expectations; Cross-equation restrictions; Time-inconsistency; Dynamic programming squared (search for similar items in EconPapers)
JEL-codes: E31 E41 E52 E58 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:141:y:2024:i:c:p:2-13

DOI: 10.1016/j.jmoneco.2023.10.001

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