IDEAS home Printed from https://ideas.repec.org/h/pal/palchp/978-0-230-29166-9_5.html
   My bibliography  Save this book chapter

Rescuing the LM Curve (and the Money Market) in a Modern Macro Course

In: Macroeconomic Theory and Macroeconomic Pedagogy

Author

Listed:
  • Roberto Tamborini

Abstract

The diffusion of direct control of the interest rate among central banks, and the parallel development of consensus on the so-called ‘New Neoclassical Synthesis’ blending New Classical and New Keynesian insights (Goodfriend and King, 1997; Blanchard, 2000; Woodford, 2003), have paved the way for the idea that macro-modelling can benefit greatly if it starts directly from the ‘fundamental three equations’ consisting of aggregate demand (IS), aggregate supply (AS) and a Taylor rule (TR) representative of interest-rate-based monetary policy. Taylor (2000), Romer (2000), Allsopp and Vines (2000), Carlin and Soskice (2004) provide examples of introductory-level treatments. Aside from the theoretical innovations in the aggregate demand and supply functions (which can be introduced at higher levels of sophistication), the main difference between this new workhorse and the one on duty to date (generally known as IS-AS-LM) is that the TR replaces the LM function as a means to determine the nominal interest rate and to link the monetary block with the real block of the economy.

Suggested Citation

  • Roberto Tamborini, 2009. "Rescuing the LM Curve (and the Money Market) in a Modern Macro Course," Palgrave Macmillan Books, in: Giuseppe Fontana & Mark Setterfield (ed.), Macroeconomic Theory and Macroeconomic Pedagogy, chapter 4, pages 76-99, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-29166-9_5
    DOI: 10.1007/978-0-230-29166-9_5
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pal:palchp:978-0-230-29166-9_5. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.palgrave.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.