IS-LM and the multiplier: A dynamic general equilibrium model
We construct in this paper a dynamic general equilibrium model which displays the central features of the IS-LM model, and notably an income multiplier greater than one, so that crowding out does not occur. It appears that the key to this result is the conjunction of two features of our model: price rigidities (as is usually expected), but also a non-Ricardian economy.
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