RT Journal Article
T1 Adding an informal sector to the IS-LM framework: A graphical exposition of the IS-LM-PC-SE model for the classroom and policymaker
A1 Costa Junior, Celso José
A1 García-Cintado, Alejandro
K1 Undergraduate macroeconomics
K1 Nonspecialists
K1 Fiscal policy
K1 Fiscal adjustments
K1 Shadow economy
K1 Tax evasion
AB 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.
PB Elsevier
YR 2024
FD 2024-06-01
LK https://hdl.handle.net/10433/20922
UL https://hdl.handle.net/10433/20922
LA en
NO Economic Systems Volume 48, Issue 2, June 2024, 101225
NO Universidad Pablo de Olavide. Departamento de Economía, Métodos Cuantitativos e Historia Económica
DS RIO
RD May 24, 2026