Keynesian Macroeconomics without the LM Curve

Keynesian Macroeconomics without the LM Curve

T he IS-LM model has been a central tool of macroeconomic teaching and practice for over half a century. Legions of earlier writers have offered criticisms of the model that have become familiar with the passage of time: the model lacks microeconomic foundations, assumes price stickiness, has no role for expectations, and simplifies the economy’s complexities to a handful of crude aggregate rel...

Working Paper No. 28 Keynesian Macroeconomics Without the LM Curve: Implications of Underlying Open Market Operations by

The paper relates to the burgeoning literature that combines an interest rate reaction function of the central bank with an IS equation and a Phillips curve relationship. It takes up the deterministic prototype model advocated by J.B.Taylor and D.Romer and, under the assumption of open market operations, makes the implied dynamics of bonds and high-powered money explicit. As a minor extension, ...

Intermediate Macroeconomics: Keynesian Models

At the risk of some oversimplification, the leading alternatives to the neoclassical / real business cycle model for understanding short run fluctuations are Keynesian models. I phrase this in the plural because there are multiple different versions of the Keynesian model, which differ in terms of how the aggregate supply block of the economy is formulated. Whereas neoclassical models emphasize...

A Future for Keynesian Macroeconomics

Towards Post - Keynesian Ecological Macroeconomics

The paper starts with a brief criticism of macroeconomic analyses of different schools of thought for their focus on economic growth and maximisation of output. This applies to the traditional Keynesian approach, which has focused on the achievement of sufficient aggregate demand to underpin full employment and full capacity utilisation, down-playing aggregate supply constraints. This also appl...