An Optimizing IS-LM Model Specification with Inflation Targeting. Microeconomic Evidence for Price Adjustment

Denis Vîntu

MPRA Paper from University Library of Munich, Germany

Abstract: The article describes a specific canonical form of IS-LM model under Inflation Targeting. Throughout last two decades, economy of Republic of Moldova have gone through recurrent periods of boom and bust. This is the fascinating phenomenon of business cycles and economic fluctuations. Although long periods of high economic growth have sometimes led people to believe that the business cycle was dead, statistical data show that it is still alive and well: economic activity continues to fluctuate in an irregular cyclical manner around its long-run growth trend. and at the start of the present decade the growth rate of real GDP per capita turned negative in all of the three largest OECD economies. A fundamental challenge for macroeconomic theory is to explain why the economy goes through these cyclical movements rather than evolving smoothly over time. The two previous years of COVID-19 implications derived the capitalist market economies of the world through recurrent periods of dynamic trends. At the start of the present decade the growth rate of real GDP per capita turned negative in all of the three largest Eastern European Economies: Russia, Ukraine and Romania. We concludes that that numerous disarrays identifying with the arrangement of strategies utilized by Monetary Policy in a specific space of study financial variables and parameters can reconsider anticipated time-arrangement and/or uncertainty in terms of model errors.

Keywords: IS-LM model; Joint Analysis of Fiscal and Monetary Policy; Stabilization; discrete regression; stochastic dynamic general equilibrium (SDGE); prices; business fluctuations and cycles; econometric methods. (search for similar items in EconPapers)
JEL-codes: C13 E21 E30 E41 E44 (search for similar items in EconPapers)
Date: 2022-03, Revised 2021-12
New Economics Papers: this item is included in nep-cis, nep-mac and nep-tra
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Published in European Journal of Economic Studies 1.11(2022): pp. 14-34

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