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The Nature of the ADAS Model Based on the ISLM Model

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  • B Bhaskara Rao

    (University of the South Pacific)

Abstract

The aggregate demand and supply model (ADAS) is interpreted as a synthesis of the Keynesian and neoclassical models. It uses the ISLM model, without explaining its nature, to derive aggregate demand (AD). It is combined with an aggregate supply (AS) curve to explain price- inflation and output dynamics. This paper argues that neither the AD nor AS curve is conceptually the same as its microeconomic counterpart and ADAS is not a synthesis. In fact ADASimplies that discretionary policy is necessary and that price changes do not perform their traditional negative feedback function.

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Bibliographic Info

Paper provided by EconWPA in its series Macroeconomics with number 0510001.

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Length: 15 pages
Date of creation: 01 Oct 2005
Date of revision:
Handle: RePEc:wpa:wuwpma:0510001

Note: Type of Document - pdf; pages: 15. Argues that the textbook ADAS model is in need of attention.
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Web page: http://128.118.178.162

Related research

Keywords: eynesian and neo classical models; aggregate demand and supply; monetary policy rule; price adjustments; stabilization policy;

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  1. William Poole, 1969. "Optimal choice of monetary policy instruments in a simple stochastic macro model," Special Studies Papers 2, Board of Governors of the Federal Reserve System (U.S.).
  2. Rao, B Bhaskara, 1986. "Alternative Aggregate Demand Functions in Macroeconomics," Australian Economic Papers, Wiley Blackwell, vol. 25(47), pages 261-64, December.
  3. Hahn, Frank, 1978. "On Non-Walrasian Equilibria," Review of Economic Studies, Wiley Blackwell, vol. 45(1), pages 1-17, February.
  4. Benassy Jean-pascal, 1987. "Non-walrasian equilibria money and macroeconomics," CEPREMAP Working Papers (Couverture Orange) 8725, CEPREMAP.
  5. David Romer, 2000. "Keynesian Macroeconomics without the LM Curve," NBER Working Papers 7461, National Bureau of Economic Research, Inc.
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Cited by:
  1. Albert Mafusire & Zuzana Brixiova, 2012. "Working Paper 156 - Macroeconomic Shock Synchronization in the East African Community," Working Paper Series 409, African Development Bank.
  2. Rao, B. Bhaskara & Tamazian, Artur & Singh, Prakash, 2009. "Demand for Money in the Asian Countries: A Systems GMM Panel Data Approach and Structural Breaks," MPRA Paper 15030, University Library of Munich, Germany.
  3. Rao, B. Bhaskara & Kumar, Saten, 2009. "A panel data approach to the demand for money and the effects of financial reforms in the Asian countries," Economic Modelling, Elsevier, vol. 26(5), pages 1012-1017, September.
  4. Heilemann, Ullrich & Findeis, Hagen, 2012. "Empirical determination of aggregate demand and supply curves: The example of the RWI Business Cycle Model," Economic Modelling, Elsevier, vol. 29(2), pages 158-165.

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