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Real Business Cycles and the Lucas Paradigm

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  • Froyen, Richard T
  • Waud, Roger N

Abstract

When the Lucas paradigm is generalized to include real effects, the effects of real factors and monetary factors on the business cycle are always interrelated. Furthermore, in such m odels, monetary factors can affect the long-run behavior of real outp ut, contrary to the commonly held view that they cannot. Real busines s cycle models and Lucas-type models are different paradigms, but not in the sense of real versus monetary. Rather, interrelationships bet ween real and monetary factors are intrinsic to the Lucas paradigm, w hereas the real business cycle literature implies a dichotomy between real and monetary factors. Copyright 1988 by Oxford University Press.

Suggested Citation

  • Froyen, Richard T & Waud, Roger N, 1988. "Real Business Cycles and the Lucas Paradigm," Economic Inquiry, Western Economic Association International, vol. 26(2), pages 183-201, April.
    • Handle: RePEc:oup:ecinqu:v:26:y:1988:i:2:p:183-201
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    1. King, Robert G., 1981. "Monetary information and monetary neutrality," Journal of Monetary Economics, Elsevier, vol. 7(2), pages 195-206.
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    Cited by:

    1. Jürgen Hagen & Manfred Neumann, 1990. "Relative price risk in an open economy with fixed and flexible exchange rates," Open Economies Review, Springer, vol. 1(3), pages 269-289, October.

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