Editing IS–LM model (section)

==Variations ==

===IS-LM-NAC model===

In 2016, [[Roger Farmer]] and Konstantin Platonov presented a so-called IS-LM-NAC model (NAC standing for "[[no arbitrage condition]]", in casu between physical capital and financial assets), in which the long-run effect of monetary policy depends on the way in which people form beliefs. The model was an attempt to integrate the phenomenon of [[secular stagnation]] in the IS-LM model. Whereas in the IS-LM model, high unemployment would be a temporary phenomenon caused by sticky wages and prices, in the IS-LM-NAC model high unemployment may be a permanent situation caused by pessimistic beliefs - a particular instance of what Keynes called [[Animal spirits (Keynes)|animal spirits]].<ref>{{cite news |last=Farmer |first=Roger E. A. | author-link=Roger Farmer |date=2016-09-02 |title=Reinventing IS-LM: The IS-LM-NAC model and how to use it |url=https://voxeu.org/article/reinventing-lm-explain-secular-stagnation |work=Vox EU |access-date=2020-10-01}}</ref> The model was part of a broader research agenda studying how beliefs may independently influence macroeconomic outcomes.<ref>{{cite journal |last1=Farmer |first1=Roger E. A. | author-link=Roger Farmer |last2=Platonov |first2=Konstantin |title=Animal spirits in a monetary model |journal=[[European Economic Review]] |volume=115 |pages=60–77 |year=2019 |doi=10.1016/j.euroecorev.2019.02.005|s2cid=55928575 |url=http://www.nber.org/papers/w22136.pdf }}</ref>