The IS-MP-model and the difference between neoclassical and Keynesian economics

Betz, Karl

doi:10.48499/FHSWF.ME.IW.5

Published

The IS-MP-model and the difference between neoclassical and Keynesian economics

Romers IS-MP-modell provides a convenient framework that, with a few extensions, allows to compare neoclassical and Keynesian economics within the context of the same model. This might facilitate discussions between proponents of the different paradigms. It turns out that the neoclassical version depends on the assumption of a rather special class of IS curves. The scepticism of Keynesians against the automatic attainment of an equilibrium is thus generally justified, as is the argument in favour of fiscal policy. The paper closes with a short exposition of a monetary Keynesian approach.