A Simulation Approach to the Taylor-Romer Model of Macroeconomic Stabilisation Policy

Ross Guest ()

Computers in Higher Education Economics Review, 2002, vol. 15, issue 1, 4-7

Abstract: This paper shows how spreadsheet simulations can be used to teach the Taylor-Romer model of macroeconomic stabilisation policy. This model is both a simpler and more realistic description of the modern implementation of monetary policy than the traditional IS-LM-AS model. The simulation exercises are quite appropriate at the introductory (or principles) level. One modification is proposed to the model; that is, the replacement of the level of output by the growth rate of output. This allows for a direct illustration of the short run trade-off between growth and inflation in the model.

Date: 2002
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