Macroeconomics II Lecture notes (4) on: Dynamic macroeconomic models of real-financial interactions
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چکیده
This section describes a simplified version of the dynamic IS − LM model in Blanchard (1981), that extends this elementary macroeconomic scheme along two dimensions: (i) by considering dynamics, and (ii) by enlarging the set of financial markets beyond the traditional "money" and "bonds". In the model below, the latter extension is limited to the stock market. Stock prices have a forward-looking nature, since they incorporate agents’ expectations on the future course of the economy (particularly on the determinants of stock market returns: dividends, future stock prices, and interest rates).1 The changes in stock prices (and, in extended versions of the model, in the prices of other financial assets such as longterm bonds) highlight the role of expectations as driving forces of real variables
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Lecture notes for Macroeconomics I , 2004
Please do NOT distribute without permission! Comments and suggestions are welcome. 1 2 Chapter 1 Introduction These lecture notes cover a one-semester course. The overriding goal of the course is to begin provide methodological tools for advanced research in macroeconomics. The emphasis is on theory, although data guides the theoretical explorations. We build entirely on models with microfounda...
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