What Went Wrong with IS-LM/AS-AD Analysis--And Why
AbstractThe current critical discussions of IS-LM/AS-AD models are approached from the perspective of Hicks’ original 1937 SI-LL model. The relevant features of this model are summarized and the geometrical representation of IS and LM curves in the original model and some of its variants is discussed. The cause and nature of the logical inconsistencies of textbook IS-LM/AS-AD models, pointed out in current discussions, are clarified and put into proper perspective. It is argued that within Hicksian IS-LM models these logical inconsistencies do not arise and that the conventional aggregate demand curve is not really needed to determine the price level.
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Bibliographic InfoArticle provided by Eastern Economic Association in its journal Eastern Economic Journal.
Volume (Year): 23 (1997)
Issue (Month): 1 (Winter)
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- B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
- E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
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