Keynesian Macroeconomics without the LM Curve | Zendy

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Keynesian Macroeconomics without the LM Curve

Author(s) -

David Romer

Publication year - 2000

Publication title -

the journal of economic perspectives

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 9.614

H-Index - 196

eISSN - 1944-7965

pISSN - 0895-3309

DOI - 10.1257/jep.14.2.149

Subject(s) - economics , new keynesian economics , monetary policy , keynesian economics , macroeconomic model , macroeconomics , phillips curve , simple (philosophy) , interest rate , baseline (sea) , money supply , econometrics , philosophy , oceanography , epistemology , geology

Changes in both the macroeconomy and in macroeconomics suggest that the IS-LM-AS model is no longer the best baseline model of short-run fluctuations for teaching and policy analysis. This paper presents an alternative model that replaces the assumption that the central bank targets the money supply with an assumption that it follows a simple interest rate rule. The resulting model is simpler, more realistic, and more coherent than IS-LM-AS, not just in its treatment of monetary policy but in many other ways. The paper also discusses other alternatives to IS-LM-AS.

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