The Mundell-Tobin Effect

This article explains the Mundell-Tobin effect by showing the relationship between the ISLM and ADAS models. The Mundell-Tobin effect states that nominal interest rates may not rise 1:1 with price levels, as the Fisher effect states. The Fisher effect derives from Fisher’s identity of i = r + π where i=nominal interest rates, r = real interest Read more about The Mundell-Tobin Effect[…]