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In the Lucas Island model, random monetary policy would imply a positive correlation between inflation and employment. However, when the monetary expansion is constant, employment
In the Lucas Island model, random monetary policy would imply a positive correlation between inflation and employment. However, when the monetary expansion is constant, employment and GDP show negative correlation. What is the main message of the Lucas Model? What is the implication of this message for the econometric evaluation of macroeconomic policies? How can we evaluate policies?
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