Comment of the Day: Charles Steindel:
...The high-level description of what's going on in those markets for goods and services (and the associated labor markets) is an "IS" curve and, as far as I know, that term is still used (the actual equations seems to be some sort of Euler equation that doesn't have any special empirical support). True, the old-fashioned money demand curve--which was the LM curve--to summarize the financial markets has been dropped in favor of some sort of monetary policy rule (and, like the whipped cream and cherry on a sundae, some sort of Phillips curve mechanism chop full of expectations is put on top to explain inflation). It ain't the old-fashioned IS-LM, but it's a direct descendant. If you work hard and rig it right, you can get exactly the same policy conclusions as in the old IS-LM world, but are required to constantly chant the magic words "expectations" and "credibility."...
