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Walras' law and the IS-LM model. A tale of progress and regress.

Klausinger, Hansjörg (2000) Walras' law and the IS-LM model. A tale of progress and regress. Department of Economics Working Paper Series, 69. Inst. für Volkswirtschaftstheorie und -politik, WU Vienna University of Economics and Business, Vienna.

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This paper deals with the integration of Walras' law into Keynesian macroeconomics and the attempts at a consistent specification of period models (beginning- vs. end-of-period-equilibrium). Three examples are examined where neglect of a consistent specification led to erroneous results: (1) the identification of the IS-condition with equilibrium of the "flow market" for bonds, (2) superficial treatments of the liquidity trap, and (3) the assumptions on the stochastic structure of monetary and real shocks in determining the optimal monetary instrument. (author's abstract)

Item Type: Paper
Keywords: Walras' law / IS-LM-model / beginning-of-period-equilibrium / end-of-period-equilibrium / liquidity trap / optimal monetary instrument
Classification Codes: JEL B22, E52
Divisions: Departments > Volkswirtschaft
Depositing User: Repository Administrator
Date Deposited: 28 Feb 2002 10:44
Last Modified: 23 Oct 2014 17:44
URI: http://epub.wu.ac.at/id/eprint/1326


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