Understanding the Remarkable Survival of Multiplier Models of Money Stock Determination
AbstractIgnoring various institutional and structural "details" has devastating implications for a large body of received theoretical and empirical work on the multiplier model, and the positive and normative economics which motivates and flows from it. The major elements of the critique include: the multiplier model is not structural, but rather is a reduced-form; reserves in practice have been endogenously determined; and the predictive accuracy of multiplier models is considerably overstated. So why does the model survive? Attractive pedagogical features, the poor performance of models with more structure, the tendency for recent expositors of the multiplier model to concede many of the points raised by the critique, and the difficulties associated with falsifying such models are emphasized.
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Bibliographic InfoArticle provided by Eastern Economic Association in its journal Eastern Economic Journal.
Volume (Year): 18 (1992)
Issue (Month): 3 (Summer)
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More information through EDIRC
Money Stock; Money; Multiplier;
Find related papers by JEL classification:
- E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
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