Adding an informal sector to the IS-LM framework: A graphical exposition of the IS-LM-PC-SE model for the classroom and policymaker
Economic policies have been shown to affect the macroeconomy in a different fashion when a sizeable shadow economy is explicitly taken into account. But, in spite of its seemingly high relevance, no intermediate-Macroeconomics textbook posits a discussion on this topic. In this paper, we seek to mak...
| Autores: | , |
|---|---|
| Tipo de recurso: | artículo |
| Fecha de publicación: | 2024 |
| País: | España |
| Institución: | Universidad Pablo de Olavide (UPO) |
| Repositorio: | RIO. Repositorio Institucional Olavide |
| Idioma: | inglés |
| OAI Identifier: | oai:rio.upo.es:10433/20922 |
| Acceso en línea: | https://hdl.handle.net/10433/20922 |
| Access Level: | acceso abierto |
| Palabra clave: | Undergraduate macroeconomics Nonspecialists Fiscal policy Fiscal adjustments Shadow economy Tax evasion |
| Sumario: | Economic policies have been shown to affect the macroeconomy in a different fashion when a sizeable shadow economy is explicitly taken into account. But, in spite of its seemingly high relevance, no intermediate-Macroeconomics textbook posits a discussion on this topic. In this paper, we seek to make a contribution by extending an otherwise conventional IS-MR-PC model along the same lines of the approach used in Blanchard’s highly acclaimed textbook (Blanchard, 2016a) to include an informal sector. We find that this two-sector model is capable of qualitatively reproducing the main basic results obtained in this literature. Therefore, importantly, this work provides a toolkit intended for undergraduate students, practitioners, policymakers, and, in general, nonspecialists on the cost-benefit analysis of economic policies in the presence of a significant underground economy. |
|---|