An Optimizing IS-LM Model Specification with Inflation Targeting. Microeconomic Evidence for Price Adjustment

Vîntu, Denis (2022): An Optimizing IS-LM Model Specification with Inflation Targeting. Microeconomic Evidence for Price Adjustment. Published in: European Journal of Economic Studies , Vol. 11, No. 1 (March 2022): pp. 14-34.

Abstract

The article describes a specific canonical form of IS-LM model under Inflation Targeting. Throughout last two decades, economy of Republic of Moldova have gone through recurrent periods of boom and bust. This is the fascinating phenomenon of business cycles and economic fluctuations. Although long periods of high economic growth have sometimes led people to believe that the business cycle was dead, statistical data show that it is still alive and well: economic activity continues to fluctuate in an irregular cyclical manner around its long-run growth trend. and at the start of the present decade the growth rate of real GDP per capita turned negative in all of the three largest OECD economies. A fundamental challenge for macroeconomic theory is to explain why the economy goes through these cyclical movements rather than evolving smoothly over time. The two previous years of COVID-19 implications derived the capitalist market economies of the world through recurrent periods of dynamic trends. At the start of the present decade the growth rate of real GDP per capita turned negative in all of the three largest Eastern European Economies: Russia, Ukraine and Romania. We concludes that that numerous disarrays identifying with the arrangement of strategies utilized by Monetary Policy in a specific space of study financial variables and parameters can reconsider anticipated time-arrangement and/or uncertainty in terms of model errors.

• Item Type: MPRA Paper
• Language: English
• Keywords: IS-LM model; Joint Analysis of Fiscal and Monetary Policy; Stabilization; discrete regression; stochastic dynamic general equilibrium (SDGE); prices; business fluctuations and cycles; econometric methods.
• Subjects: C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C13 - Estimation: General; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E21 - Consumption ; Saving ; Wealth; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E30 - General; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E41 - Demand for Money; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy

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