A note on IYLM, ISLM and General Theory-compatible modelling
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.
Domaines
Economies et finances
Origine :
Fichiers produits par l'(les) auteur(s)
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