Some UK evidence on the Forward Looking IS Equation

Paul Turner ()

Discussion Paper Series from Department of Economics, Loughborough University

Abstract: This paper seeks to demonstrate that a backward looking specification of the IS curve using UK data can encompass the forward looking model recently discussed by Kara and Nelson (2004). By relaxing the restriction that the interest rate and the inflation rate enter the IS curve with coefficients of equal magnitude but opposite sign, we obtain IS curve estimates which are empirically plausible and which encompass the rival specification.

Keywords: IS curve; forward looking; real interest rate. (search for similar items in EconPapers)
JEL-codes: E17 E31 (search for similar items in EconPapers)
Date: 2007-05, Revised 2007-05
New Economics Papers: this item is included in nep-cba and nep-mac
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