Working papers, Department of Economics, WU (Wirtschaftsuniversität Wien)
Walras' Law and the IS-LM Model. A Tale of Progress and Regress.
Abstract: 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 identication 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.
Keywords: Walras' Law; IS-LM-model; beginning-of-period-equilibrium; end-of-period-equilibrium; liquidity trap; optimal monetary instrument; (follow links to similar papers)
JEL-Codes: B22; E52; (follow links to similar papers)
Before downloading any of the electronic versions below
you should read our statement on
for viewing Postscript files and the
Acrobat Reader for viewing and printing pdf files.
Report other problems with accessing this service to Sune Karlsson ()
or Helena Lundin ().
Design Joakim Ekebom