IS-LM and the multiplier: A dynamic general equilibrium model

Pre-print, Working paper: We construct in this paper a dynamic general equilibrium model which displays the central features of the IS-LM model, and notably an income multiplier greater than one, so that crowding out does not occur. It appears that the key to this result is the conjunction of two features of our model: price rigidities (as is usually expected), but also a non-Ricardian economy.

Author(s)

Jean-Pascal Bénassy

Date of publication
  • 2006
Keywords JEL
E12 E62 E63
Keywords
  • IS-LM
  • DSGE models
  • Keynesian multiplier
  • Crowding out
  • Non-Ricardian economies
Internal reference
  • PSE Working Papers n°2006-14
Version
  • 1