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What Went Wrong with IS-LM/AS-AD Analysis--And Why

Author

Listed:
  • Ingo Barens

    (Bergische Universitat Wupertal)

Abstract

The 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.

Suggested Citation

  • Ingo Barens, 1997. "What Went Wrong with IS-LM/AS-AD Analysis--And Why," Eastern Economic Journal, Eastern Economic Association, vol. 23(1), pages 89-99, Winter.
    • Handle: RePEc:eej:eeconj:v:23:y:1997:i:1:p:89-99
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    File URL: http://web.holycross.edu/RePEc/eej/Archive/Volume23/V23N1P89_99.pdf
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    Citations

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    Cited by:

    1. Kakarot-Handtke, Egmont, 2014. "Mr. Keynes, Prof. Krugman, IS-LM, and the End of Economics as We Know It," MPRA Paper 53608, University Library of Munich, Germany.
    2. Ingo Barens & Volker Caspari, 1999. "Old views and new perspectives: on reading Hick's 'Mr. Keynes and the Classics'," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 6(2), pages 216-241.
    3. Kim, Minseong, 2022. "AS-AD model as a stock-flow consistent model," OSF Preprints ceb2z, Center for Open Science.

    More about this item

    Keywords

    AS AD;

    JEL classification:

    • 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; Modern Monetary Theory

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