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Economic Policy Effectiveness in Hicksian Analysis: A Reply
Credit and Capital Markets – Kredit und Kapital, Vol. 15 (1982), Iss. 3 : pp. 429–433
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Tavlas, George S.
References
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Abstract
Economic Policy Effectiveness in Hicksian Analysis: A Reply
It has previously been demonstrated that in a positively-sloped IS-curve system, the less the interest sensitivity of the demand for money, the greater is the speed of adjustment to exogenous shocks. This notes argues that there is a limit as to how verticle the LM curve can become for stability to obtain in the model under consideration. Specifically, that limit is set by the requirement that the interest elasticity of the demand for money must not be greater than the difference by which the marginal propensity to spend exceeds unity