Relaxation Oscillations in New IS-LM Model
Barbora Voln\'a
TL;DR
This paper introduces a revised IS-LM economic model that addresses key limitations of the traditional version and demonstrates the existence of relaxation oscillations within it.
Contribution
The paper develops a new IS-LM model removing assumptions of constant prices and exogenous money supply, and proves relaxation oscillations occur in this model.
Findings
Existence of relaxation oscillations proven
Model eliminates constant price and exogenous money supply assumptions
Provides a more realistic IS-LM framework
Abstract
In this paper, we create new version of IS-LM model. The original IS-LM model has two main deficiencies: assumptions of constant price level and of strictly exogenous money supply. New IS-LM model eliminates these deficiencies. In the second section, we prove the existence of relaxation oscillations in this new IS-LM model.
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Taxonomy
TopicsEconomic theories and models · Economic Theory and Policy · Monetary Policy and Economic Impact