Economic Themes (2012) 50 (4) 3, 465-485
Gordana Marjanović, Vladimir Mihajlović
Abstract: The most valuable elements of macro-economic theory, resulting from decades-long development process, are encompassed by the so-called new concensus in macro-economics. What has been defined by it, among other things, are guidelines which central bank should follow when engaged in contemporary monetary policy. Inflation targeting, as a form of monetary policy, is considered to be most compatible with the guidelines. For this reason, IS-PC-MR model which includes the main aspects of this form of monetary policy, is applied in this paper.The purpose of the paper is to show the potentials that this model may have in analysing the manner by which a central bank responds to economic trends and disruptions, as well as to list its advantages to other models, above all to IS-LM model.
Keywords: new consensus; monetary policy; inflation targeting; IS-PC-MR model; IS-LM model; supply and demand shocks
A CONTEMPORARY ANALYSIS OF MONETARY POLICY BY THE APPLICATION OF THE IS-PC-MR MODEL
Gordana Marjanović, Vladimir Mihajlović
Abstract: The most valuable elements of macro-economic theory, resulting from decades-long development process, are encompassed by the so-called new concensus in macro-economics. What has been defined by it, among other things, are guidelines which central bank should follow when engaged in contemporary monetary policy. Inflation targeting, as a form of monetary policy, is considered to be most compatible with the guidelines. For this reason, IS-PC-MR model which includes the main aspects of this form of monetary policy, is applied in this paper.The purpose of the paper is to show the potentials that this model may have in analysing the manner by which a central bank responds to economic trends and disruptions, as well as to list its advantages to other models, above all to IS-LM model.
Keywords: new consensus; monetary policy; inflation targeting; IS-PC-MR model; IS-LM model; supply and demand shocks
