A Textbook Macro Model with Money
16 Pages Posted: 7 Dec 2005
Date Written: December 2005
In the traditional macroeconomic IS-LM-AS model the money stock is an exogenous instrumental variable of the central bank. This model type is being increasingly superseded by New Keynesian (NK) models. However, it is widely ignored that NK theorists essentially put forward a model for analysing monetary policy in which monetary aggregates ceased to play any role. This paper introduces a monetary macro model (MMM) in which the money market is fully represented and in which inflation is a monetary phenomenon.
Keywords: money, P-Star, New-Keynesian model, inflation
JEL Classification: A22, E41, E52
Suggested Citation: Suggested Citation