testimony
Lucas: monetary neutrality, retrospectively (1995) From Robert Lucas's 1995 Nobel lecture, *Monetary Neutrality*. A retrospective on the rational-expectations revolution and on the postwar evolution of macroeconomic theory — written from the vantage of the Great Moderation, two decades after the 1976 Lucas critique.
Two decades on the rational-expectations revolution.
The main finding that emerged from the research of the 1970s is that anticipated changes in money growth have very different effects from unanticipated changes. Anticipated monetary expansions are not associated with the kind of stimulus to employment and production that Hume described, and have inflationary consequences that are likewise much different.
Lucas’s 1995 Nobel lecture is a retrospective on the rational-expectations program from inside the Great Moderation it helped produce. The argument summarises the 1970s research that established the policy-ineffectiveness proposition (anticipated monetary policy has limited real effects), reflects on what survived the Volcker disinflation test (the methodological apparatus and the natural-rate framework), and what did not (the strong claim that credibly-committed disinflations should be costless). The retrospective vantage marks this with oxblood accent — written from the settled period 1995, looking back on the methodological revolution begun in the 1976 critique .
Robert Lucas , 1995. Robert E. Lucas Jr., 'Monetary Neutrality,' Nobel Memorial Lecture, December 7, 1995. . source ↗
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