1995/08/01 by David Colander · 2 citations
Economics, Econometrics and Finance · #Economic Theory and Policy #Economic theories and models #Monetary Policy and Economic Impact
paper · pdf · doi:10.1257/jep.9.3.169
openalex publication_date 1995/08/01 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/30
This paper explains that the AS/AD model as currently presented in the tests is seriously flawed. It does not fulfill the minimum requirement of a model: logical consistency. Its component parts are derived from models that reflect different, and inconsistent, models of the economy. Moreover, the appropriate disequilibrium adjustment story that appropriately accompanies it is inconsistent with observed reality. In this alternative model, Keynesian adjustment occurs through shifting AS/AD curves along institutionally determined price level vectors rather than through movements along the AS/AD curves.