 How Well Does the IS-LM Model Fit in a Developing Economy: The Case of IndiaMudabber Ahmed The International Journal of Applied Economics, 2005, vol. 2, issue 1, pages 90-106 Abstract: The IS-LM model, as a vehicle for policy analysis, has a substantial influence on the policy makers and academicians. Like the developed countries, the IS-LM framework remains important for students to learn in the developing countries because of the benefits it offers in clarifying their thinking about the implications for practical policy issues. The main purpose of this study is to examine how well the dynamic properties of the estimated model of India match to the theoretical predictions of IS-LM model. The purpose is accomplished through Structural Vector Autoregressive (SVAR) model by estimating variance decompositions and impulse response functions. Our model explicitly accounts for the variables included in core macroeconomic models developed in the Keynesian flavour and specifies identification scheme, which capture some features of the developing economies in general. Our findings support the advocates of the IS-LM model most often compared to critics of the model. Keywords: Structural vector autoregressive model; identification; adverse supply shock; IS shock; money demand shock; money supply shock (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: http://EconPapers.repec.org/RePEc:ija:ancoec:v:2:y:2005:i:1:p:90-106 Access Statistics for this article More articles in The International Journal of Applied Economics from Department of General Business, Southeastern Louisiana University |
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