<p>There is a huge discussion about structural Macroeconomics models - especially on their theoretical and practical relevance - with IS-LM being on the forefront of the battle some 40+ years ago. Many people simply reject LM existence. Advanced level textbooks ignore this approach for two decades. However it ironically dominates introductory courses.
<br> Here is a nice <a href="http://www.bloombergview.com/articles/2014-12-12/krugman-gets-the-big-picture-right" rel="nofollow">discussion</a> from Bloomberg that claims that, perhaps, the most instructive paper on the matter was published in QJE back in 1992 - <a href="http://qje.oxfordjournals.org/content/107/2/709.abstract" rel="nofollow">link</a>. (Full text can be downloaded elsewhere.)
<br>From personal experience I could add that IS-LM is a great tool to build initial schematic intuition about the issue in question even though its microfoundations are not clear at all (put it another way, we have no idea why does the model work, but it does).</p>

CC BY-SA 3.0
2015-06-08T03:04:32.477Z
Are there any recent discussions? Like Japan's abenomics
economist
CC BY-SA 3.0
2015-06-08T05:36:02.407Z
@economist Most 'discussions' of that sort are nowdays in blogs. My post was just a tip to encourage you to follow, say, [Krugman](http://krugman.blogs.nytimes.com/2011/10/09/is-lmentary/), who uses IS-LM arguments regulary. Just search for 'krugman blog IS-LM'.
garej
CC BY-SA 3.0
2015-06-06T14:40:04.090Z
2015-06-06T18:46:35.513Z
2015-06-06T18:46:35.513Z
garej
<p>I learnt IS-LM model but I got curious whether it is applicable to the real world. I mean it's just an model, so I doubt that the realtionship between Y and r actually exists. Are there any real life examples that prove the model? I want to know if something like a recent world event or fiscal and monetary policies in sone countries actually affects output and interest rate.</p>

<macroeconomics><keynesian-economics><self-study>
Real world application of IS-LM model
economist
# Real world application of IS-LM model

(Asked by: username_0 on 2015-06-06)

I learnt IS-LM model but I got curious whether it is applicable to the real world. I mean it's just an model, so I doubt that the realtionship between Y and r actually exists. Are there any real life examples that prove the model? I want to know if something like a recent world event or fiscal and monetary policies in sone countries actually affects output and interest rate.

**Tags:** macroeconomics, keynesian-economics, self-study


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## 1 answers

### Answer by username_1 on 2015-06-06. Score: 3

There is a huge discussion about structural Macroeconomics models - especially on their theoretical and practical relevance - with IS-LM being on the forefront of the battle some 40+ years ago. Many people simply reject LM existence. Advanced level textbooks ignore this approach for two decades. However it ironically dominates introductory courses.
  
 Here is a nice [discussion](http://www.bloombergview.com/articles/2014-12-12/krugman-gets-the-big-picture-right) from Bloomberg that claims that, perhaps, the most instructive paper on the matter was published in QJE back in 1992 - [link](http://qje.oxfordjournals.org/content/107/2/709.abstract). (Full text can be downloaded elsewhere.)
  
From personal experience I could add that IS-LM is a great tool to build initial schematic intuition about the issue in question even though its microfoundations are not clear at all (put it another way, we have no idea why does the model work, but it does).

> **Comments:**
> **username_0**: Are there any recent discussions? Like Japan's abenomics  
> **username_1**: @username_0 Most 'discussions' of that sort are nowdays in blogs. My post was just a tip to encourage you to follow, say, [Krugman](http://krugman.blogs.nytimes.com/2011/10/09/is-lmentary/), who uses IS-LM arguments regulary. Just search for 'krugman blog IS-LM'.  

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