Abstract
This chapter presents three equations from Keynesian models: (i) the IS curve, which relates to the real interest rate and real output; (ii) the LM curve, which relates to the nominal interest rate and the quantity of money; (iii) and the Phillips curve, which relates to the unemployment rate (or output gap) and the inflation rate. Each of these equations is specified from two approaches: from the traditional Keynesian viewpoint, the equations are grounded on behavioral rules; from the new Keynesian approach, the specifications are based on microeconomics. The two approaches produce not only distinct specifications, but also different predictions that can be tested empirically.
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Barbosa, F.d.H. (2018). Keynesian Models: The IS and LM Curves, the Taylor Rule, and the Phillips Curve. In: Macroeconomic Theory. Springer, Cham. https://doi.org/10.1007/978-3-319-92132-7_6
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DOI: https://doi.org/10.1007/978-3-319-92132-7_6
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Publisher Name: Springer, Cham
Print ISBN: 978-3-319-92131-0
Online ISBN: 978-3-319-92132-7
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