The mainstream inflation-targeting literature makes the strong assumption that the central bank can exactly target the interest rate which affects investment and consumption decisions and hence the money supply plays no role in the monetary policy strategy. This assumption is equivalent to...

This note takes part in the debate on the topic “a macroeconomics without LM”. It shows that, when the central bank does not control directly the interest rates on the money and financial markets, LM curve has another role to play than to determine in an endogenous way the money supply when...