In a seminal paper, Robert E. Lucas, Jr. provided the theoretical relationshipbetween aggregate demand andreal output based on relative price confusionat the individual market level.Subsequently, an alternative New Keynesian aggregate supply relationshipwas derived and it was demonstratedthat the two theories can be distinguishedon the basis of how both the rate of inflation andthe volatility of relative pricesaffect its slope.By emphasizing the first implication of New Keynesian theory,strong evidence was obtained supporting this modelusing international data.We also concentrate on the second difference between the two theories.We derive the individual market-levelequilibrium relationship for the Lucas model, i.e., the disaggregate supply curve.We estimate the crucial parameters of the relationshipbetween aggregate nominal demand shocks and real outputusing U.S. intranational state and industry data.We find that the Lucas modelomits important New Keynesian features of the data.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Volume (Year): 3 (1999) Issue (Month): 02 (June) Pages: 187-203 Download reference. The following formats are available: HTML
(with abstract),
plain text
(with abstract),
BibTeX,
RIS (EndNote, RefMan, ProCite),
ReDIF
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)