Working Paper: NBER ID: w1797
Authors: Stanley Fischer
Abstract: In 1944 Franco Modigliani published a famous article summarizing the Keynesian model; in 1963 he extended the 1944 framework. This paper,written for a conference in honor of Modigliani, asks how the earlier papers would be modified in the light of recent developments in macroeconomics. The attempt is not to summarize modern macroeconomics, but rather to describe the structure modern macroeconomists should have in mind in thinking about the way the economy and macroeconomic policy work. The paper argues that the basic structure of the 1963 model still stands, with modifications. The 1985 version is an extended Phillips-curve-augmented IS-LM model. The major modifications to the 1963 model are in the treatment of the Phillips curve and aggregate supply, in the analysis of expectations, and in the openness of the economy.
Keywords: No keywords provided
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| wage stickiness (J31) | monetary policy effectiveness (E52) |
| monetary policy effectiveness (E52) | real economic outcomes (e.g., unemployment) (E24) |
| 1985 model (E17) | aggregate demand (E00) |
| inflation expectations (E31) | wage adjustments (J31) |
| openness of the economy (F41) | domestic economic conditions (E66) |
| wage and price adjustments (E64) | different economic equilibria (D59) |