Cross-Regime Tests of the Lucas Supply Function in Developing Countries

The aggregate supply function developed by Lucas (1973) predicts that the short-run effects of monetary disturbances on real output are negatively related to the variability of such disturbances. This paper assesses the empirical relevance of the Lucas supply function for a large sample of developing countries by using distribution-free statistical methods. The negative relationship seems to be a robust feature of developing country data and holds true for almost all of the analytical subgroups examined.