Endogenous I-S and External L-M Diagram in Equilibrium towards Policy-Making

Hideyuki Kamiryo ()

International Advances in Economic Research, 2010, vol. 16, issue 3, 282-296

Abstract: This paper reforms the conventional I-S and L-M diagram endogenously, clarifying how to finalize the relationship between the real and financial assets, replacing the I-S by the rate of return function of the ratio of investment to output/income and the L-M by the ratio of M2 to endogenous capital K, after verifying the neutrality of the markets to the real assets, and using endogenous parameters and variables in the 58 country data-sets, 1990–2007 (KEWT 3.09), with three average areas, where equilibrium holds by year, country, and sector, over years. This diagram and its interpretation are able to present urgent policies for perceiving a bud of bubbles and suggesting urgent steps not to reoccur bubbles. Copyright International Atlantic Economic Society 2010

Keywords: I-S and L-M; Neutrality of the markets; Endogenous equilibrium; Endogenous capital; Endogenous and external inflation rates; The rate of return in equilibrium; M2; Ten year debt yield; Exchange rate; Bubbles; E60-1; (E40; E50) (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s11294-010-9261-4

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