Collected Papers on Monetary Theory by Robert E. Lucas Jr., Max Gillman

By Robert E. Lucas Jr., Max Gillman

Robert Lucas is likely one of the notable financial theorists of the previous hundred years. besides Knut Wicksell, Irving Fisher, John Maynard Keynes, James Tobin, and Milton Friedman (his teacher), Lucas revolutionized our knowing of ways funds interacts with the true economic system of construction, intake, and exchange.

Lucas’s contributions are either methodological and significant. Methodologically, he built dynamic, stochastic, basic equilibrium types to research monetary decision-makers working via time in a posh, probabilistic surroundings. Substantively, he integrated the volume conception of cash into those versions and derived its implications for cash development, inflation, and rates of interest in the end. He additionally confirmed different results of expected and unanticipated adjustments within the inventory of cash on fiscal fluctuations, and helped to illustrate that there has been now not a long-run trade-off among unemployment and inflation (the Phillips curve) that policy-makers may perhaps exploit.

The twenty-one papers amassed during this quantity fall essentially into 3 different types: center financial thought and public finance, asset pricing, and the genuine results of economic instability. released among 1972 and 2007, they are going to motivate scholars and researchers who are looking to learn the paintings of a grasp of monetary modeling and to enhance economics as a natural and utilized science.

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Gurley, review of M. Friedman, “A Program for Monetary Stability,” Rev. Econ. Stat. 43 (1961), 307–308. â•⁄ 5. €E. €A. Rapping, Real wages, employment and inflation, J. Polit. Econ. 77 (1969). â•⁄ 6. €E. €A. Rapping, Price Expectations and the Phillips Curve, Amer. Econ. Rev. 59 (1969). â•⁄ 7. €F. Muth, Rational expectations and the theory of price movements, Econometrica 29 (1961). â•⁄ 8. €S. €S. , “Microeconomic FoundaÂ�tions of Employment and Inflation Theory,” Norton, New York, 1969.

Exchange in the economy studied takes place in two physically separated markets. The allocation of traders across markets in each period is in part stochastic, introducing fluctuations in relative prices between the two markets. A second source of disturbance arises from stochastic changes in the quantity of money, which in itself introduces fluctuations in the nominal price level (the average rate of exchange between money and goods). Information on the current state of these real and monetary disturbances is transmitted to agents only through prices in the market where each agent happens to be.

The model thus serves as a simple context for examining the conditions under which a price series’ failure to possess the Martingale property can be viewed as evidence of non-Â�competitive or “irraÂ�tional” behavior. Econometrica 46, no. 6 (November 1978): 1429–1445. 1. This paper originated in a conversation with Pentti Kouri, who posed to me the problem studied below. I would also like to thank Yehuda Freidenberg, Jose Scheinkman, and Joseph Williams for many helpful comments. ” As Muth made clear, this hypothÂ�esis (like utility maximization) is not “behavioral”: it does not describe the way agents think about their environment, how they learn, process information, and so forth.

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