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Critique of IS-LM: fiscal deficits, loanable funds, Keynesian Cross and IS-LM

Kim, Minseong (2014): Critique of IS-LM: fiscal deficits, loanable funds, Keynesian Cross and IS-LM.

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Abstract

This paper intends to discuss some problematic properties IS-LM and loanable funds together have when dealing with fiscal deficits. Many others have focused on its assumptions for criticism of IS-LM, but I will mainly focus on its fundamental modelling nature. To say more specifically, I will argue that ordinary IS-LM analysis is in contradictory nature to simultaneous equilibrium system, and therefore loanable funds.

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