Economics Department Working Paper Series
Working Paper Number
2009-14
Publication Date
2009
Abstract
This paper derives conditions for two key Keynesian propositions in a simple IS-LM model: (a) the paradox of thrift, and (b) the crowding-in of private investment ex- penditures by government expenditures. A linear speci cation of the model is then presented as a special case that can be used for empirical analysis. Using data for the US economy for the period 1959--2009, time series estimation of the linear model using instrumental variables regression shows that the paradox of thrift and crowding-in are real possibilities, especially in the sub-period, 1974 -- 2009, that excludes the Golden Age of capitalism.
DOI
https://doi.org/10.7275/1066672
Recommended Citation
Basu, Deepankar, "The Paradox of Thrift and Crowding-In of Private Investment in a Simple IS-LM Model" (2009). Economics Department Working Paper Series. 3.
https://doi.org/10.7275/1066672