A Theoretical Structure of Optimizing-Expectational IS-LM Model  

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Jenis: Article from Journal - ilmiah nasional - tidak terakreditasi DIKTI - atma jaya
Dalam koleksi: Jurnal Ekonomi dan Bisnis vol. 1 no. 2 (Aug. 2001), page 138-156.
Topik: IS-LM Model; General Dynamic Equilibrium; Rational Expectations-Stochastic; Microeconomics-Optimization

Ketersediaan

Perpustakaan Pusat (Semanggi) Nomor Panggil: JJ100.2 Non-tandon: 1 (dapat dipinjam: 0) Tandon: tidak ada

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Isi artikel

The purpose of this paper is to specify theoretically the stochastic-optimizing version of IS-LM model. First, we determine how the household’s preference behaves and the proper specification of total resource restrictions. Then, by using the toolkits analysis on which the model structure relied on, i.e. optimizing analysis of microeconomics foundations and stochastic behavior as consequences of introducing rational expectations condition, we construct the stochastic IS portion of the closed-open economy model with and without fiscal authority parameters. The functional relation shows that expectation of next period output and stochastic demand shock play a crucial role in determining today’s output, and there is a contraction in current output with respect to a higher real cost of borrowing. In the next stage, the specification of stochastic LM model reveals that the effect of a lower current nominal interest rate overturn future expectation of real money balances and the same as IS model, the role of output expectation is significant for the behavior of real money balances expectation. Under the openness condition, the IS curve demonstrate that the real exchange rate and foreign output have a crucial role in explaining the fluctuation of domestic output.

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