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Title Details:
Monetary Policy Rules and Aggregate Demand: IS-MP model
Authors: Kyrikos, Dimitrios
Reviewer: Vlassis, Minas
Subject: LAW AND SOCIAL SCIENCES > ECONOMIC SCIENCES > MACROECONOMICS AND MONETARY ECONOMICS
LAW AND SOCIAL SCIENCES > ECONOMIC SCIENCES > MACROECONOMICS AND MONETARY ECONOMICS > GENERAL AGGREGATIVE MODELS
LAW AND SOCIAL SCIENCES > ECONOMIC SCIENCES > MACROECONOMICS AND MONETARY ECONOMICS > MACROECONOMICS: CONSUMPTION, SAVING, PRODUCTION, EMPLOYMENT, AND INVESTMENT
LAW AND SOCIAL SCIENCES > ECONOMIC SCIENCES > MACROECONOMICS AND MONETARY ECONOMICS > PRICES, BUSINESS FLUCTUATIONS, AND CYCLES
LAW AND SOCIAL SCIENCES > ECONOMIC SCIENCES > MACROECONOMICS AND MONETARY ECONOMICS > MONEY AND INTEREST RATES
LAW AND SOCIAL SCIENCES > ECONOMIC SCIENCES > MACROECONOMICS AND MONETARY ECONOMICS > MONETARY POLICY, CENTRAL BANKING, AND THE SUPPLY OF MONEY AND CREDIT
LAW AND SOCIAL SCIENCES > ECONOMIC SCIENCES > MACROECONOMICS AND MONETARY ECONOMICS > MACROECONOMIC POLICY, MACROECONOMIC ASPECTS OF PUBLIC FINANCE, AND GENERAL OUTLOOK
LAW AND SOCIAL SCIENCES > ECONOMIC SCIENCES > INTERNATIONAL ECONOMICS > MACROECONOMIC ASPECTS OF INTERNATIONAL TRADE AND FINANCE
Description:
Abstract:
The extended IS-LM-AS or AD-AS model is based on simplifying assumptions which impose some internal inconsistency. Therefore, in this chapter we introduce more realistic assumptions regarding the conduct of monetary policy which enable the replacement of the LM curve with a monetary policy rule pursued by the Central Bank, as it really is the case. This change enhances compatibility of interest rates related to the functioning of the goods market and the conduct of monetary policy, highlights the role of expectations for aggregate demand determination, and introduces the rate of inflation (instead of the price level) as a variable related to short-run fluctuations. In this setting, we derive the relationship between the rate of inflation and aggregate expenditure and discuss the effects of fiscal policy and of changes in the monetary policy rule. In addition, we analyze the effects of a liquidity trap on the monetary policy rule and discuss the implications of changes in fiscal policy, monetary policy, and inflationary expectations.
Linguistic Editors: Kalokyri, Anastasia
Technical Editors: Karamolegkou, Maria
Type: Chapter
Creation Date: 2015
Item Details:
License: http://creativecommons.org/licenses/by-nc-nd/3.0/gr
Handle http://hdl.handle.net/11419/1566
Bibliographic Reference: Kyrikos, D. (2015). Monetary Policy Rules and Aggregate Demand: IS-MP model [Chapter]. In Kyrikos, D. 2015. Macroeconomic Analysis and Policy [Undergraduate textbook]. Kallipos, Open Academic Editions. https://hdl.handle.net/11419/1566
Language: Greek
Is Part of: Macroeconomic Analysis and Policy
Publication Origin: Kallipos, Open Academic Editions