Macroeconomics with M4

Carlos Ivan Simonsen Leal () and Sérgio Ribeiro da Costa Werlang ()

Brazilian Journal of Political Economy, 1995, vol. 15, issue 1, 70-83

Abstract: This article is a remake of usual macroeconomic models, as the IS-LM. We useas exogenous (under the control of government) the ample monetary aggregate M4. We startby a careful analysis of the Walras’ identity, extending Simonsen (1983). As a result, it ispossible to see that with M4 it is necessary to abandon either the IS – curve (i.e. equilibriumin the market for goods and services) or the LM – curve (equilibrium in the money market).Then, we analyze the demand for M4 in Brazil. Finally, we study a LM4 – LM macroeconomicmodel. The usefulness of the model is clear: one can directly verify the impact of variationson M4 in the macro variables. JEL Classification: E47; E41; E12.

Keywords: Money demand; ISLM model; M4 (search for similar items in EconPapers)
Date: 1995
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