Munich Personal RePEc Archive

An Improved LM Curve

Hiermeyer, Martin (2018): An Improved LM Curve.

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Abstract

Over the last decades, the LM curve has largely disap-peared from research and, to some extent, also from teach-ing. Because of its well-known weaknesses, the LM curve is now frequently replaced with an interest rate rule. The paper suggests an improved LM curve which gets rid of the weaknesses of the LM curve, but retains the LM curve’s strength of including money, and even expands upon this strength.

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