Fitting Money into Conventional Macroeconomic Models

Girol Karacaoglu

Australian Economic Papers, 1987, vol. 26, issue 48, 83-100

Abstract: Conventional macroeconomic models disregard both the distinction between liquid and investment assets and the unique f eature of money as that liquid asset that serves as the means of paym ent. This paper incorporates both features into a four-asset dynamic IS-LM model. After imposing the additional restrictions suggested by the two distinctions on the structure of the model, the paper goes on to use the revised model to investigate the effectiveness of monetar y, fiscal, and debt management policy. It is shown that both distinct ions influence the effectiveness of policy. The results are compared with current wisdom on related issues. Copyright 1987 by Blackwell Publishers Ltd/University of Adelaide and Flinders University of South Australia

Date: 1987
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Persistent link: https://EconPapers.repec.org/RePEc:bla:ausecp:v:26:y:1987:i:48:p:83-100

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