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A More Detailed IS-LM Story

Author

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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. 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.
    2. Heijdra, Ben J., 2017. "Foundations of Modern Macroeconomics," OUP Catalogue, Oxford University Press, edition 3, number 9780198784135.
    3. Michael Kumhof & Jaromir Benes, 2012. "The Chicago Plan Revisited," IMF Working Papers 12/202, International Monetary Fund.
    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)

    More about this item

    Keywords

    Fiscal policy; monetary policy; teaching of economics;

    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

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