IS-LM Stability Revisited: Samuelson was Right, Modigliani was Wrong

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In Hicks’s IS-LM model, where it is assumed that production is determined in the goods marketand the interest rate is determined in the money market, when the marginal propensity to spend is greater than one, the IS has a positive slope. Modigliani (1944), Varian (1977) and Sargent (1987) determined...

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Detalles Bibliográficos
Autor: Mendoza, Waldo
Formato: artículo
Fecha de Publicación:2015
Institución:Pontificia Universidad Católica del Perú
Repositorio:Revistas - Pontificia Universidad Católica del Perú
Lenguaje:español
OAI Identifier:oai:revistaspuc:article/13735
Enlace del recurso:http://revistas.pucp.edu.pe/index.php/economia/article/view/13735
Nivel de acceso:acceso abierto
Materia:Economic thinking
macroeconomic theory
IS-LM model
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spelling IS-LM Stability Revisited: Samuelson was Right, Modigliani was WrongLa estabilidad de la IS-LM revisitada: Samuelson estaba en lo cierto, Modligiani equivocadoMendoza, WaldoEconomic thinkingmacroeconomic theoryIS-LM modelIn Hicks’s IS-LM model, where it is assumed that production is determined in the goods marketand the interest rate is determined in the money market, when the marginal propensity to spend is greater than one, the IS has a positive slope. Modigliani (1944), Varian (1977) and Sargent (1987) determined that in this special case the IS-LM model is stable when the LM slope isgreater than the IS.In line with Samuelson (1941), this article shows that in this case the model is stable when the IS slope is greater than the LM slope. However, in this stable case the model does not have a useful economic meaning.One solution to this theoretical problem is to abandon the Keynesian adjustment mechanism and replace it with the Classical mechanism where the interest rate is determined in the goods market and production is determined in the money market. In this case, the IS-LM model is stable when the LM is steeper than the IS.En el modelo IS-LM de Hicks, en el que se asume que la producción se determina en el mercado de bienes y la tasa de interés en el mercado de dinero, cuando la propensión marginal a gastar es mayor que uno, la IS tiene pendiente positiva. Modigliani (1944), Varian (1977) y Sargent (1987), determinaron que en este caso especial el modelo IS-LM es estable cuando la pendiente de la LM es mayor que la de la IS.En línea con Samuelson (1941), este artículo muestra que en este caso especial el modelo es estable cuando la pendiente de la IS es mayor que la de la LM. Sin embargo, en este caso estable, el modelo no tiene un significado económico útil.Una solución a este problema teórico es abandonar el mecanismo de ajuste keynesiano y reemplazarlo por el mecanismo clásico, donde la tasa de interés se determina en el mercado de bienes y la producción en el mercado de dinero. En este caso el modelo IS-LM es estable cuando la LM es más empinada que la IS.Pontificia Universidad Católica del Perú2015-08-01info:eu-repo/semantics/articleinfo:eu-repo/semantics/publishedVersionapplication/pdfhttp://revistas.pucp.edu.pe/index.php/economia/article/view/1373510.18800/economia.201501.004Economía; Volume 38 Issue 75 (2015); 123-1502304-43060254-4415reponame:Revistas - Pontificia Universidad Católica del Perúinstname:Pontificia Universidad Católica del Perúinstacron:PUCPspahttp://revistas.pucp.edu.pe/index.php/economia/article/view/13735/14359Derechos de autor 2015 Economíahttp://creativecommons.org/licenses/by/4.0info:eu-repo/semantics/openAccessoai:revistaspuc:article/137352025-07-04T15:14:53Z
dc.title.none.fl_str_mv IS-LM Stability Revisited: Samuelson was Right, Modigliani was Wrong
La estabilidad de la IS-LM revisitada: Samuelson estaba en lo cierto, Modligiani equivocado
title IS-LM Stability Revisited: Samuelson was Right, Modigliani was Wrong
spellingShingle IS-LM Stability Revisited: Samuelson was Right, Modigliani was Wrong
Mendoza, Waldo
Economic thinking
macroeconomic theory
IS-LM model
title_short IS-LM Stability Revisited: Samuelson was Right, Modigliani was Wrong
title_full IS-LM Stability Revisited: Samuelson was Right, Modigliani was Wrong
title_fullStr IS-LM Stability Revisited: Samuelson was Right, Modigliani was Wrong
title_full_unstemmed IS-LM Stability Revisited: Samuelson was Right, Modigliani was Wrong
title_sort IS-LM Stability Revisited: Samuelson was Right, Modigliani was Wrong
dc.creator.none.fl_str_mv Mendoza, Waldo
author Mendoza, Waldo
author_facet Mendoza, Waldo
author_role author
dc.subject.none.fl_str_mv Economic thinking
macroeconomic theory
IS-LM model
topic Economic thinking
macroeconomic theory
IS-LM model
description In Hicks’s IS-LM model, where it is assumed that production is determined in the goods marketand the interest rate is determined in the money market, when the marginal propensity to spend is greater than one, the IS has a positive slope. Modigliani (1944), Varian (1977) and Sargent (1987) determined that in this special case the IS-LM model is stable when the LM slope isgreater than the IS.In line with Samuelson (1941), this article shows that in this case the model is stable when the IS slope is greater than the LM slope. However, in this stable case the model does not have a useful economic meaning.One solution to this theoretical problem is to abandon the Keynesian adjustment mechanism and replace it with the Classical mechanism where the interest rate is determined in the goods market and production is determined in the money market. In this case, the IS-LM model is stable when the LM is steeper than the IS.
publishDate 2015
dc.date.none.fl_str_mv 2015-08-01
dc.type.none.fl_str_mv info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
format article
status_str publishedVersion
dc.identifier.none.fl_str_mv http://revistas.pucp.edu.pe/index.php/economia/article/view/13735
10.18800/economia.201501.004
url http://revistas.pucp.edu.pe/index.php/economia/article/view/13735
identifier_str_mv 10.18800/economia.201501.004
dc.language.none.fl_str_mv spa
language spa
dc.relation.none.fl_str_mv http://revistas.pucp.edu.pe/index.php/economia/article/view/13735/14359
dc.rights.none.fl_str_mv Derechos de autor 2015 Economía
http://creativecommons.org/licenses/by/4.0
info:eu-repo/semantics/openAccess
rights_invalid_str_mv Derechos de autor 2015 Economía
http://creativecommons.org/licenses/by/4.0
eu_rights_str_mv openAccess
dc.format.none.fl_str_mv application/pdf
dc.publisher.none.fl_str_mv Pontificia Universidad Católica del Perú
publisher.none.fl_str_mv Pontificia Universidad Católica del Perú
dc.source.none.fl_str_mv Economía; Volume 38 Issue 75 (2015); 123-150
2304-4306
0254-4415
reponame:Revistas - Pontificia Universidad Católica del Perú
instname:Pontificia Universidad Católica del Perú
instacron:PUCP
instname_str Pontificia Universidad Católica del Perú
instacron_str PUCP
institution PUCP
reponame_str Revistas - Pontificia Universidad Católica del Perú
collection Revistas - Pontificia Universidad Católica del Perú
repository.name.fl_str_mv
repository.mail.fl_str_mv
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IS-LM Stability Revisited: Samuelson was Right, Modigliani was Wrong
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