Dynamic IS-LM-AS Model Augmented by the Inflation Expectations

AUTHOR(S):

Karol Szomolányi, Martin Lukáčik, Adriana Lukáčiková

TITLE

Dynamic IS-LM-AS Model Augmented by the Inflation Expectations

ABSTRACT

The paper investigates a dynamic IS-LM-AS model augmented by the expectations. The money and the potential product grow by the exogenous rates. In general, the inflation is adjusted to the production gap and the inflation expectations are adaptive or rational. We will find the stability conditions. There is a possibility of the cyclical movement of the economic variables. The results are similar to ones generated by the Sidrauski model of the monetary growth – money is super-neutral in the steady state. Using the model, it is possible to demonstrate the various views of the different economic schools as the Keynesian school, the Classical School, the Monetary School, the Neo-Classical Synthesis, the New Classical School and the New Keynesian School.

KEYWORDS

adaptive and rational expectations, inflation adjustment, stability conditions, economic schools.

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Cite this paper

Karol Szomolányi, Martin Lukáčik, Adriana Lukáčiková. (2016) Dynamic IS-LM-AS Model Augmented by the Inflation Expectations. International Journal of Mathematical and Computational Methods, 1, 207-213