The BMW model: A new framework for teaching monetary economics
Peter Bofinger (),
Eric Mayer () and
Timo Wollmershäuser ()
Munich Reprints in Economics from University of Munich, Department of Economics
Although the IS/LM-AS/AD model is still the central tool of macroeconomic teaching in most macroeconomic textbooks, it has been criticized by several economists. Colander (1995) demonstrated that the framework is logically inconsistent. Romer (2000) showed that it is unable to deal with a monetary policy that uses the interest rate as its operating target, and Walsh criticized that it is not well suited for an analysis of inflation targeting. The authors present a framework that develops the Romer approach into a very simple but, at the same time, comprehensive macroeconomic model. In spite of its simplicity, it can carry the main insights of the New Keynesian macroeconomics to an intermediate level and deal with issues like inflation targeting, monetary policy rules, and central bank credibility. Copyright
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Published in Journal of Economic Education 1 37(2006): pp. 98-117
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Journal Article: The BMW Model: A New Framework for Teaching Monetary Economics (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:lmu:muenar:20214
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