Walras' Law and the IS-LM Model. A Tale of Progress and Regress
This paper deals with the integration of Walras' law into Keynesian macroeconomics and the attempts at a consistent specification of period models (beginning- vs. end-of-period-equilibrium). Three examples are examined where neglect of a consistent specification led to erroneous results: (1) the identication of the IS-condition with equilibrium of the "flow market" for bonds, (2) superficial treatments of the liquidity trap, and (3) the assumptions on the stochastic structure of monetary and real shocks in determining the optimal monetary instrument.
|Date of creation:||May 2000|
|Contact details of provider:|| Postal: Welthandelsplatz 1, 1020 Vienna, Austria|
Web page: http://www.wu.ac.at/economics/en
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Felderer, Bernhard & Homburg, Stefan, 2005. "Makroökonomik und neue Makroökonomik," EconStor Books, ZBW - German National Library of Economics, number 92556.
- Svensson, Lars E. O., 1999.
"Inflation targeting as a monetary policy rule,"
Journal of Monetary Economics,
Elsevier, vol. 43(3), pages 607-654, June.
- Svensson, Lars E.O., 1998. "Inflation Targeting as a Monetary Policy Rule," Seminar Papers 646, Stockholm University, Institute for International Economic Studies.
- Lars E.O. Svensson, 1998. "Inflation Targeting as a Monetary Policy Rule," NBER Working Papers 6790, National Bureau of Economic Research, Inc.
- Svensson, Lars E O, 1998. "Inflation Targeting as a Monetary Policy Rule," CEPR Discussion Papers 1998, C.E.P.R. Discussion Papers.
- Svensson, Lars E. O., 1998. "Inflation targeting as a monetary policy rule," CFS Working Paper Series 1998/16, Center for Financial Studies (CFS).
- Svensson, L.E.O., 1998. "Inflation Targeting as a Monetary Policy Rule," Papers 646, Stockholm - International Economic Studies.
- Bain, A D & McGregor, Peter G, 1985. "Buffer-Stock Monetarism and the Theory of Financial Buffers," The Manchester School of Economic & Social Studies, University of Manchester, vol. 53(4), pages 385-403, December.
- Buiter, Willem H & Eaton, Jonathan, 1981. "Keynesian Balance of Payments Models: Comment [On the Almost Total Inadequacy of Keynesian Balance-of-Payments Theory]," American Economic Review, American Economic Association, vol. 71(4), pages 784-795, September.
- J. Tobin, 1958. "Liquidity Preference as Behavior Towards Risk," Review of Economic Studies, Oxford University Press, vol. 25(2), pages 65-86.
- S. T. Lowry (ed.), 1992. "Perspectives On The History Of Economic Thought," Books, Edward Elgar Publishing, number 291.
- Buiter, Willem H, 1980. "Walras' Law and All That: Budget Constraints and Balance Sheet Constraints in Period Models and Continuous Time Models," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 21(1), pages 1-16, February.
- Parkin, Michael, 1978. "A Comparison of Alternative Techniques of Monetary Control under Rational Expectations," The Manchester School of Economic & Social Studies, University of Manchester, vol. 46(3), pages 252-287, September.
- Woglom, Geoffrey, 1980. "Are period models well defined?," Journal of Macroeconomics, Elsevier, vol. 2(4), pages 333-350.
- S. T. Lowry (ed.), 1992. "Perspectives On The History Of Economic Thought," Books, Edward Elgar Publishing, number 290.
- Foley, Duncan K, 1975. "On Two Specifications of Asset Equilibrium in Macroeconomic Models," Journal of Political Economy, University of Chicago Press, vol. 83(2), pages 303-324, April.
- Hellwig, Martin, 1975. "The demand for money and bonds in continuous-time models," Journal of Economic Theory, Elsevier, vol. 11(3), pages 462-464, December.
- Laidler, David, 1984. "The 'Buffer Stock' Notion in Monetary Economics," Economic Journal, Royal Economic Society, vol. 94(376a), pages 17-34, Supplemen.
- William Poole, 1970. "Optimal Choice of Monetary Policy Instruments in a Simple Stochastic Macro Model," The Quarterly Journal of Economics, Oxford University Press, vol. 84(2), pages 197-216.
- William C. Brainard & James Tobin, 1968. "Pitfalls in Financial Model-Building," Cowles Foundation Discussion Papers 244, Cowles Foundation for Research in Economics, Yale University.
- May, Josef, 1970. "Period analysis and continuous analysis in Patinkin's macroeconomic model," Journal of Economic Theory, Elsevier, vol. 2(1), pages 1-9, March.
- Felderer, Bernhard & Homburg, Stefan, 1986. "Eine Fehlinterpretation des Keynesianischen Modells," EconStor Open Access Articles, ZBW - German National Library of Economics, pages 457-468.
- McCaleb, Thomas S. & Sellon, Gordon Jr., 1980. "On the consistent specification of asset markets in macroeconomic models," Journal of Monetary Economics, Elsevier, vol. 6(3), pages 401-415, July.
- Ferguson, J David & Hart, William R, 1980. "Liquidity Preference or Loanable Funds: Interest Rate Determination in Market Disequilibrium," Oxford Economic Papers, Oxford University Press, vol. 32(1), pages 57-70, March.
- Serge Coulombe, 1987. "A Note on the Pigou Effect and the Liquidity Trap," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 10(1), pages 163-165, September.
- Kuska, Edward A, 1978. "On the Almost Total Inadequacy of Keynesian Balance-of-Payments Theory," American Economic Review, American Economic Association, vol. 68(4), pages 659-670, September.
- Blinder, Alan S. & Solow, Robert M., 1973. "Does fiscal policy matter?," Journal of Public Economics, Elsevier, vol. 2(4), pages 319-337.
When requesting a correction, please mention this item's handle: RePEc:wiw:wiwwuw:wuwp069. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Department of Economics)
If references are entirely missing, you can add them using this form.