Robert E. Lucas Jr's research while affiliated with University of Chicago and other places

Publications (55)

Article
We show that regulatory changes that occured in the banking sector in the early eighties, that considerably weakened Regualtion Q, can explain the apparent instabilty of money demand starting in the same period. We evaluate the effects of the regulatory changes using a model that goes beyond aggreates as M1 and treats currency and different deposit...
Article
We analyze a model economy with many agents, each with a different productivity level. Agents divide their time between two activities: producing goods with the production-related knowledge they already have, and interacting with others in search of new, productivity-increasing ideas. These choices jointly determine the economy’s current production...
Article
This is the Commencement Address delivered at the University of Chicago on December 9, 1988.
Article
This paper introduces and partially develops a new model of endogenous technological change, viewed as the product of a class of problem-solving producers. The model, based on earlier work by Eaton and Kortum, is built up from the premise that all knowledge resides in the head of some individual person and the knowledge of a firm, or economy, or an...
Article
This paper proposes a model to describe the evolution of real gross domestic product (GDP) in the world economy that is intended to apply to all open economies. The parameters of the model are calibrated using evidence from Sachs and Warner on economies classed as open, from Parente and Prescott on economies that have successfully begun to develop,...
Article
This paper develops a model of a monetary economy in which individual firms are subject to idiosyncratic productivity shocks as well as general inflation. Sellers can change price only by incurring a real “menu cost.†We calibrate this cost and the variance and autocorrelation of the idiosyncratic shock using a new U.S. data set of individual pr...
Article
Remarks given at the Budapest meetings of the Society for Economic Dynamics. (Copyright: Elsevier)
Article
We prove the existence of a symmetric equilibrium in a circular city in which businesses and housing can both be located anywhere in the city. In this equilibrium, firms balance the external benefits from locating near other producers against the costs of longer commutes for workers. An equilibrium city need not take the form of a central business...
Article
There is an elegant geometric theory of cities that describes the location of activities and the equilibrium pattern of land prices. In the simplest versions of the theory, production is centered at the city center, and people live at differing distances from their jobs. In choosing a residential location, households face a tradeoff between expensi...
Article
Full-text available
Introductionconsensus emerged about conduct monetary policy that now servescommon ground discussion specific policies called for particular situations. The central elements this consensus that instrument monetary policy oughtshort term interest rate, that policy should focused control inflation, and that inflation can reduced increasing short term...
Article
This paper surveys research on the welfare cost of inflation. New estimates are provided, based on U.S. time series for 1900–94, interpreted in a variety of ways. It is estimated that the gain from reducing the annual inflation rate from 10 percent to zero is equivalent to an increase in real income of slightly less than one percent. Using aggregat...
Article
This note describes a numerical simulation of a model of economic growth, a simplified version of Robert Tamura's (1996) model of world income dynamics, based on technology diffusion. The model makes predictions for trends in average world income growth and about the evolution of the relative income distribution that accord well with observation. T...
Article
This paper describes the efficient allocation of consumption and work effort in an economy in which workers face idiosyncratic employment risk and considerations of moral hazard prevent full insurance. We impose a lower bound on the expected discounted utility that can be assigned to any agent from any date onward and show, with this feature added,...
Article
This lecture surveys recent models of growth and trade in search of descriptions of technologies that are consistent with episodes of very rapid income growth. Emphasis is placed on the on-the-job accumulation of human capital: learning by doing. Possib le connections between learning rates and international trade are discussed Copyright 1993 by Th...
Article
This paper is a theoretical study of alternative ways of allocating resources in an exchange economy in which individual preferences are subject to unpredictable shocks that cannot be monitored. Efficiency in this economy requires wealth inequality to increase over time. The paper is based on the author's 1991 Harry Johnson Lecture. Copyright 1992...
Article
This paper is a study of the dynamics of the efficient distribution of consumption in an exchange economy with many consumers, each of whom is subject to private, idiosyncratic taste shocks. We propose a recursive method for finding feasible allocations that are incentivecompatible and that are Pareto optimal within this set. The method is applied...
Article
The egalitarian predictions of the simplest neoclassical models of trade and growth are well known and easy to explain, as they follow from entirely standard assumptions on technology alone. Consider two countries producing the same good with the same con- stant returns to scale production function, relating output to homogeneous capital and labor...
Article
The authors analyze an aggregative general equilibrium model, in which the use of money is motivated by a cash-in-advance constraint, applied to purchases of a subset of consumption goods. The system is subject to both real and monetary shocks, which are economy-wide and observed by all. They develop methods for verifying the existence of, characte...
Article
This paper studies the theoretical and empirical implications of monetary policy making by committee under four different voting protocols. The protocols are a consensus model, where a supermajority is required for a policy change; an agenda-setting model, where the chairman controls the agenda; a dictator model, where the chairman has absolute pow...
Article
We introduce a new hybrid approach to joint estimation of Value at Risk (VaR) and Expected Shortfall (ES) for high quantiles of return distributions. We investigate the relative performance of VaR and ES models using daily returns for sixteen stock market indices (eight from developed and eight from emerging markets) prior to and during the 2008 fi...
Article
Value-at-Risk measures the potential loss on a portfolio, where the potential loss is linked directly to the probability of large, adverse movements in market prices. This paper considers four classes of Value-at-Risk model: variance-covariance models; historical-simulation models; Monte-Carlo simulation models; and extreme-value estimation models....
Article
The U.S. unemployment rate was certainly too high in 1975, and most economists would agree that it is too high today. It will also be agreed that this observation poses a problem for public policy (in a sense that the observation that winters in Chicago are “too cold” does not). But what exactly is meant by the statement that unemployment is “too h...
Article
This paper proposes a new theory of the size distributions of business firms. It postulates an underlying distribution of persons by managerial "talent" and then studies the division of persons into managers and employees and the allocation of productive factors across managers. The implications of the theory for secular changes in average firm siz...
Article
This paper is a theoretical examination of the stochastic behavior of equilibrium asset prices in a one-good, pure exchange economy with identical consumers. A general method of constructing equilibrium prices is developed and applied to a series of examples.
Article
This paper develops a theoretical example of a business cycle, that is, a model economy in which real output undergoes serially correlated movements about trend which are not explainable by movements in the availability of factors of production. The mechanism generating these movements involves unsystematic monetary-fiscal shocks, the effects of wh...
Article
Thirty years after the Great Depression, economists have again worked up the nerve to ask an obvious question: Why is it that workers choose (under some conditions) to be unemployed rather than to take employ- ment at lower wage rates? Soon after serious attention began to be focused on this question, a variety of models were advanced to illustrate...
Article
This paper offers a series of models designed to aid in the evaluation and control of an individual research and development project. The project under consideration is assumed to involve costs incurred over a period [0, T] and a return earned at T (or discounted to T) when the project is completed. In two of the models discussed below, the complet...
Article
This paper determines the time series behavior of investment, output, and prices in a competitive industry with a stochastic demand. It is shown, first, that the equilibrium development for the industry solves a particular dynamic programming problem (maximization of "consumer surplus"). This problem is then studied to determine the characteristics...

Citations

... The failure of any user,proponent or advocate of the rational expectations hypothesis or critic of the rational expectations hypothesis to demonstrate the forecasting superiority of the rational expectations hypothesis over other approaches, through the use of proper scoring rules in the nearly 60 years that have passed since the publication of Muth's original exposition of the rational expectations hypothesis, calls into question the claims made by Lucas and Sargent in 1979 about rational expectations. ...
... For speculative motive, liquidity preference depends on the opportunity cost of holding money (Joesph et al., 2013;Ben-Salha & Jaidi, 2014). Regulatory changes (Lucas & Nicolini, 2019), financial liberalization (Kumar et al., 2013), business cycles (Belonggia & Ireland, 2019), changing economy structure (Jung, 2016) and financial innovation (Brunnermeier & Niepelt, 2019), have been identified as additional determinants of the stability of money demand. ...
... In this paper we investigate a generalisation of a Boltzmann mean field game (BMFG) for knowledge growth, originally introduced by the economists Lucas and Moll [23]. In BMFG the evolution of the agent density with respect to their knowledge level is described by a Boltzmann equation. ...
... Similarly, inflation also has a significant negative impact on residents' happiness [15,16]. The reason why inflation would reduce residents' happiness is mainly that people's current and future income levels may be affected by inflation expectations and the subsequent actual inflation [17][18][19]. ...
... In an essay read to graduating University of Chicago economics students in 1988, Robert Lucas (1988) described what, as he sees it, economists do. Lucas used the specific question of the connection between monetary policy and economic depression to frame his discussion, which is very much in the experimentalist spirit: "One way to demonstrate that I understand this connection-I think the only really convincing way-would be for me to engineer a depression in the United States by manipulating the US money supply." ...
Citing article
... There have been numerous studies which attempt to: (a) model business cycles; (b) shed light into the interconnection between business cycles and other economic features (for instance, inflation, rate of unemployment, technological shocks etc); and (c) understand the behaviour of business cycles (for instance, dominant frequencies, main business cycle drivers etc). Indicatively, we refer to Angeletos et al.(2020), Barsky and Sims (2011), Beaudry et al.(2020), Bloom et al.(2018), Dekimpe and Deleersnyder (2018), Galí (1999), Galí (2015), Hicks (1950), Jaimovich and Rebelo (2009), Justiniano et al.(2010), Jump and Stockhammer (2022), Lucas (1975), Michaillat and Saez (2022), Piiroinen and Raghavendra (2019), Puu (1989). Due to the complexity of the subject, many studies focus on specific types of economies which share similar characteristics. ...
... Great Depression is an interesting case of short run Phillips curve. Table 1 in Lucas (1972), which is listed below, contains data to observe real wage rate, nominal wage rate, inflation rate and unemployment rate between 1929 and 1939. Notice that "Normal" regards data modified by Lucas based on his particular labor supply theory in order to test his argument about unemployment. ...
... The literature of neoclassical labor supply, which was introduced by Lucas and Rapping (1969) predicts a positive response to positive shock in wages. It predicts that a driver would work longer if hourly earnings increases in a short horizon. ...
... Dotsey, King and Wolman (1999); Golosov and Lucas Jr (2007) shocks during recessions compared to expansionary periods -"pushing on a string" as they phrase itwith an especially pronounced asymmetry in the reaction of investment. Our work complements these findings and offers an explanation: elevated dispersion of idiosyncratic shocks in bad times leads to lower responsiveness to monetary policy operations because of stronger real options effects and a greater share of adjustment occurring through nominal as opposed to real channels. ...