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Critique and consequence

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  • Sargent, Thomas J.

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.

Suggested Citation

  • Sargent, Thomas J., 2024. "Critique and consequence," Journal of Monetary Economics, Elsevier, vol. 141(C), pages 2-13.
    • Handle: RePEc:eee:moneco:v:141:y:2024:i:c:p:2-13
    DOI: 10.1016/j.jmoneco.2023.10.001
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    More about this item

    Keywords

    Rational expectations; Cross-equation restrictions; Time-inconsistency; Dynamic programming squared;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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