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The evolution of IS-LM models: empirical evidence and theoretical presuppositions

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  • Alessandro Vercelli

Abstract

This paper offers an explanation of the resilience of IS-LM models, which are still alive more than sixty years after the birth of the first prototype despite growing criticism within the profession. To this end two significant episodes of their evolution are examined in some detail: the genesis of the prototype of the 'first generation' of IS-LM models (Hicks 1937), and a recent example of what is here called the 'second generation' of IS-LM models (McCallum and Nelson 1997). The resilience of IS-LM models is mainly related to their adaptability to a changing perception of the economic environment within which they are applied. This depends on the evolution of the relevant stylized facts and of the salient policy problems as well as on the evolution of the prevailing theoretical assumptions and methodological approaches. The stock of cumulated empirical evidence and the flow of new additions to it have both played a role in this process, though they have done so mainly indirectly by affecting the perception of the economic environment.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Journal of Economic Methodology.

Volume (Year): 6 (1999)
Issue (Month): 2 ()
Pages: 199-219

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Handle: RePEc:taf:jecmet:v:6:y:1999:i:2:p:199-219

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Related research

Keywords: IS-LM; microfoundations; theory and facts; Keynesian economics; classical economics; new Keynesian economics; new classial economics;

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Cited by:
  1. Heller, Claudia, 2007. "Hicks, a Teoria Geral e a Teoria Geral generalizada
    [Hicks, the General Theory and the generalization of the General Theory]
    ," MPRA Paper 3286, University Library of Munich, Germany.
  2. Schilirò, Daniele, 2005. "Il simposio su "mr. Keynes' system" all'Oxford meeting e il modello is-lm
    [The symposium on " mr. Keynes' system" to the Oxford meeting and the is-lm model]
    ," MPRA Paper 33019, University Library of Munich, Germany.
  3. Edward Nelson, 2003. "Money and the transmission mechanism in the optimizing IS-LM specification," Working Papers 2003-019, Federal Reserve Bank of St. Louis.
  4. Boermans, Martijn Adriaan & Moore, Basil J, 2008. "Locked-in and Sticky Textbooks: Mainstream Teaching of the Money Supply Process," MPRA Paper 14845, University Library of Munich, Germany, revised Apr 2009.
  5. Szomolányi Karol & Lukáčik Martin & Lukáčiková Adriana, 2011. "Effect of Monetary Intervention in the Frame of IS-LM Model with Dynamic Price Adjustment and Adaptive Expectations," Politická ekonomie, University of Economics, Prague, vol. 2011(1), pages 47-57.
  6. Michel De Vroey, 2004. "The History of Macroeconomics Viewed against the Background of the Marshall-Walras Divide," History of Political Economy, Duke University Press, vol. 36(5), pages 57-91, Supplemen.

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