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Cambridge Journal of Economics Advance Access published online on November 8, 2006
Cambridge Journal of Economics, doi:10.1093/cje/bel027
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© The Author 2006. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved.
Received September 9, 2005
Revised May 12, 2006

Article

The nature of the ADAS model based on the ISLM model

B. Bhaskara Rao 1 *

1 University of the South Pacific

* To whom correspondence should be addressed.
B. Bhaskara Rao, E-mail: raob{at}connect.com.fj


  Abstract

The aggregate demand and supply model (ADAS) is interpreted as a synthesis of the Keynesian and neoclassical models. It uses the ISLM model, without explaining its nature, to derive aggregate demand (AD). It is combined with an aggregate supply (AS) curve to explain price-inflation and output dynamics. This paper argues that neither the AD nor the AS curve is conceptually the same as its microeconomic counterpart and that ADAS is not a synthesis. In fact, ADAS implies that discretionary policy is necessary and that price changes do not perform their traditional negative feedback function.

Keywords: Keynesian and neoclassical models; Aggregate demand and supply; Monetary policy rule; Price adjustments; Stabilization policy.
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Comment: The nature of the ADAS model based on the ISLM model
Camb. J. Econ., August 28, 2009; (2009) bep052v1.
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