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A More Detailed IS-LM Story

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  • Hiermeyer, Martin

Abstract

Textbooks give a fairly short IS-LM story. This paper offers a more detailed one. This story has several advantages vis-à-vis the usual textbook story, including: (a) it is clear about what it means by "money"; (b) it describes the central bank as targeting an interest rate; and (c) it covers the money multiplier and quantitative easing. To unfold, the more detailed story requires only minor adjustments to the IS-LM model, mostly the addition of the quantity equation of money – a mere identity.

Suggested Citation

  • Hiermeyer, Martin, 2017. "A More Detailed IS-LM Story," MPRA Paper 81004, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:81004
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    References listed on IDEAS

    as
    1. Mr. Michael Kumhof & Mr. Jaromir Benes, 2012. "The Chicago Plan Revisited," IMF Working Papers 2012/202, International Monetary Fund.
    2. Pascal Bridel, 2014. "The "Treasury View": An (un-)expected return?," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 21(5), pages 920-942, October.
    3. Heijdra, Ben J., 2017. "Foundations of Modern Macroeconomics," OUP Catalogue, Oxford University Press, edition 3, number 9780198784135.
    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.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Fiscal policy; monetary policy; teaching of economics;
    All these keywords.

    JEL classification:

    • A2 - General Economics and Teaching - - Economic Education and Teaching of Economics
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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