ROBERT E. LUCAS, JR.* The University of Chicago
eltzer*s research career has been so productive and so varied that it would be an act of folly, not friendship, to attempt to review it in a single paper. Yet I do want to talk about his research on this scholarship is carriedoccasion, for research is what Allan's career is mainly about, and I want to do SO in detail, because details are the way out. Accordingly, I will focus my attention mainly on a single paper, one oney: The Evidence from Time Series," published
that has influenced my own thinking on monetary economics a great deal, Meltzer's "The Demand for Meltzer's in the Journal of Political Economy in 1963."Demand for ?4oney" was one in a series of his empirical hich involved joint research with later contributions by studies in monetary economics,
Karl Drunner. It followed earlier work by Latane and others, especially Friedman, and helped to stimulate closely related Laidler and others.' Friedman's (1956) terms, to demonstrate The shared objective of this research program was, in that thedemand for money is a
"highly stable function" of a limited number of variables, to discover the most useful, operational measures of money and these other variables, and (again citing Friedman) to work "toward isolating the of monetary behavior."
eltzer's paper was the first to estimate an income
This like to Leonardo helpful discussion
paper Leiderman,was prepared Bennett and/or Conference.
November ,+ 1987 Milton Rosen, draft. Sherwin
Carnegie-Rochester Lars Peter and Thomas Sargent I also excellent
Conference. iiansen, Lawrence from Robert
king, for Summers
Thomas Cooley, McCallum, P.S.
discussions at the
comments on an earlier Eswar-Prasad
and Laidler (1966). and for
‘Two Of course, research, Friedman some of
important this (1959). and especially
sequels other the See
to work earlier
Brunner was of
and M?lfzer closely Friedman
(1963) to and
contributions(1977) and, more
0 167 - 2231/88/$3.50
@ 1988 Elsevier Science Publishers B.V. (North-Holland)
(or wealth) elasticity and an interest elasticity SimultaneoUSly
from a single country (the U.S.).
The objective of the present
review andreplicate these results,
might be interpreted theoretically, and to see how well they stand up to the 25 years of new data that have become available since questions of economic policy. eltzer wroteAn estimated money demand function provides answers to two important The income elasticity, in a setting in which long run real output growth is both fairly predictable andinsensitive to changes in monetary policy, provides the answer to the question: What rate of growth of money is consistent with long run price stability? The interest elasticity is the key parameter needed to answer the question: What are the welfare costs to society of deviations from stability? long run price Purely qualitative answers to these questions, along the lines
of "Inflation ratesare significantly related to money growth rates" or "Inflation reduces welfare" are interesting and useful, perhaps, but surely propositions such as "An Ml growth rate of 3 percent per year will bring about price stability" or "A ten percent annual inflation rate has a social cost equivalent Though answers to the to a 0.5 percent of an of decline in that real income" are more interesting and, if...