Commentary

Abstract

Over the past decade, the debate about monetary policy has taken a surprising and profound turn. Real business cycle theorists like Charles Plosser have challenged some of the central tenets of modern macroeconomics. They have suggested that economic fluctuations reflect the optimal response of the economy to changes in technology and that monetary policy is largely irrelevant to these fluctuations. Most laymen would consider these suggestions ridiculous. And, what is more telling, if we could use a time machine to transport a macroeconomist to the present from almost any point in the past, the macroeconomist would likely agree with the layman’s assessment.