Teaching Undergraduate Macroeconomics with the Taylor-Romer Model

Abstract

This paper sets out a version of the Taylor-Romer model of short-run macroeconomic equilibrium which can be used for teaching undergraduate economics principles courses. The aim is to generate a model with the proven advantages of the IS-LM framework but with a more realistic description of central bank behaviour. The paper then provides a dynamic analysis of longer-term adjustment using a phase diagram but without the need for a formal mathematical derivation.