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Macroeconomics with M4

Author

Listed:
  • Carlos Ivan Simonsen Leal
  • Sérgio Ribeiro da Costa Werlang

Abstract

This article is a remake of usual macroeconomic models, as the IS-LM. We useas exogenous (under the control of government) the ample monetary aggregate M4. We startby a careful analysis of the Walras’ identity, extending Simonsen (1983). As a result, it ispossible to see that with M4 it is necessary to abandon either the IS – curve (i.e. equilibriumin the market for goods and services) or the LM – curve (equilibrium in the money market).Then, we analyze the demand for M4 in Brazil. Finally, we study a LM4 – LM macroeconomicmodel. The usefulness of the model is clear: one can directly verify the impact of variationson M4 in the macro variables. JEL Classification: E47; E41; E12.

Suggested Citation

  • Carlos Ivan Simonsen Leal & Sérgio Ribeiro da Costa Werlang, 1995. "Macroeconomics with M4," Brazilian Journal of Political Economy, Center of Political Economy, vol. 15(1), pages 70-83.
    • Handle: RePEc:ekm:repojs:v:15:y:1995:i:1:p:70-83:id:1226
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    More about this item

    Keywords

    Money demand; ISLM model; M4;
    All these keywords.

    JEL classification:

    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory

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