Wealth Effects, Government Budget Constraints, and
Ben Bernanke
EC6012 Lecture 8
Stephen Kinsella
Dept. Economics,
University of Limerick.
stephen.kinsella@ul.ie
March 23, 2009
Stephen Kinsella (University of Limerick) Wealth Effects, Government Budget Constraints, and Ben Bernanke 23, 2009
March 1/9

Today
Admin
1
Bernanke-Blinder
2
Government Wealth
3
Stephen Kinsella (University of Limerick) Wealth Effects, Government Budget Constraints, and Ben Bernanke 23, 2009
March 2/9

IS LM
Figure: Equilibrium in the IS-LM model
Stephen Kinsella (University of Limerick) Wealth Effects, Government Budget Constraints, and Ben Bernanke 23, 2009
March 3/9

BB Model
Figure: Bernanke-Blinder Model Equilibrium.
Stephen Kinsella (University of Limerick) Wealth Effects, Government Budget Constraints, and Ben Bernanke 23, 2009
March 4/9

Table
Rise in Income Money Credit Interest Rate on bonds
Bank Reserves + + + -
Money Demand - + - +
Credit Supply + + + +
Credit Demand - - + -
Commodity Demand + + + +
Table: Effects of Shocks on Observable Variables. (?, pg. 438.)
Stephen Kinsella (University of Limerick) Wealth Effects, Government Budget Constraints, and Ben Bernanke 23, 2009
March 5/9

A New Model
LM
i
I_{T}
I_{T}
Y
Y_{e} Y_{F}
(M-\\alpha)/
(\\gamma)
Figure: Nell’s ISLM.
Stephen Kinsella (University of Limerick) Wealth Effects, Government Budget Constraints, and Ben Bernanke 23, 2009
March 6/9

JW Curve
i
G>tY
JW
G<tY
IS
Y
Stephen Kinsella (University of Limerick) Wealth Effects, Government Budget Constraints, and Ben Bernanke 23, 2009
March 7/9

JW-IS-LM
i
LM
JW
IS
I_{T}
Y
Y = G/t
(M - alpha)/gamma
Stephen Kinsella (University of Limerick) Wealth Effects, Government Budget Constraints, and Ben Bernanke 23, 2009
March 8/9

References
Stephen Kinsella (University of Limerick) Wealth Effects, Government Budget Constraints, and Ben Bernanke 23, 2009
March 9/9