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Pré-Publication, Document De Travail Année : 2017

A note on IYLM, ISLM and General Theory-compatible modelling

Angel Asensio
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Résumé

In a recent article titled 'IYLM: a General Theory-compatible replacement to ISLM', Roderick O'Donnell and Colin Rogers (2016, Cambridge J. of Econ. 40(1), 349-364) offer a model claimed to be 'a representation of the GT’s central general propositions' substantially different from the ISLM version. In this short note, it is shown that: a) the IY equation (product market equilibrium condition) is mis-specified, b) once the additional ‘overall equilibrium condition’ i = mec is added, the IY-LM model is formally an IS-LM model. It is argued furthermore that the effects of the entrepreneurs’ long-term expectations and of the state of liquidity preference can be made explicit in the investment and money demand functions to account for those highly Keynesian features within the IS-LM framework.
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halshs-01618276 , version 1 (17-10-2017)

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  • HAL Id : halshs-01618276 , version 1

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Angel Asensio. A note on IYLM, ISLM and General Theory-compatible modelling . 2017. ⟨halshs-01618276⟩
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