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Une note sur la règle du taux d’intérêt et le rôle de la courbe LM
[A note on the interest rate rule and the role of LM curve]

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  • Dai, Meixing

Abstract

This note takes part in the debate on the topic “a macroeconomics without LM”. It shows that, when the central bank does not control directly the interest rates on the money and financial markets, LM curve has another role to play than to determine in an endogenous way the money supply when the monetary policy is specified in terms of interest rate rule. In effect, flexible price LM curve makes it possible to specify the expected inflation rate dynamics within an analytical framework generally adopted by the economists defending the idea of abandoning LM in the teaching of the macroeconomics in first cycle.

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File URL: http://mpra.ub.uni-muenchen.de/13779/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 13779.

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Date of creation: Dec 2003
Date of revision: Mar 2009
Handle: RePEc:pra:mprapa:13779

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Related research

Keywords: Interest rate rule; flexible price LM curve; monetary policy; expected inflation rate dynamics; macroeconomic stability;

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  1. Gordon, Robert J, 1996. "The Time-varying NAIRU and its Implications for Economic Policy," CEPR Discussion Papers 1492, C.E.P.R. Discussion Papers.
  2. Dai, Meixing & Sidiropoulos, Moïse, 2002. "Règle du taux d'intérêt optimale, prix des actions et taux d'inflation anticipé : une étude de la stabilité macroéconomique
    [Optimal interest rate rule, asset prices and expected inflation r    ," MPRA Paper 14401, University Library of Munich, Germany, revised Jun 2003.
  3. Benjamin Friedman, 2003. "The LM Curve: A Not-So-Fond Farewell," NBER Working Papers 10123, National Bureau of Economic Research, Inc.
  4. David H. Romer, 2000. "Keynesian Macroeconomics without the LM Curve," Journal of Economic Perspectives, American Economic Association, vol. 14(2), pages 149-169, Spring.
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