The monetary impact in a dynamic model with perfect forecaste
DOI:
https://doi.org/10.24275/uam/azc/dcsh/ae/2025v40n103/LizarazuKeywords:
Dynamic IS-LM model, Impulse-response functions , Monetary impact , Perfect forecast , Phillips curveAbstract
The monetary impact is studied in a dynamic model with perfect forecasting by numerically solving a system of first-order autonomous difference equations. Numerical simulations of the impulse-response functions describe the time path of the main endogenous variables. Given the elasticity of the demand for money to the interest rate, two results arise from the monetary impact: (i) money has real effects in the short term, but is neutral in the long term; and (ii) the monetary issue has real effects in the short and long term. The previous propositions are supported by computational calculations using specialized software, such as Matlab and others.
JEL Classification: C02, E31, E32, E47, E58
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