David Romer has proposed a new basic macroeconomic framework: the IS--MP--IA model. Its proponents claim that it represents the 'modern' view of macroeconomics. We show that the new framework remains closely attached to the neoclassical synthesis and, in addition, does not take account of: (i)...

We provide a formal definition of the “liquidity trap” (LT) according to which, a LT arises if a combination of high precautionary saving, low investment and stringent conditions for access to bank credit stemming from a high degree of liquidity preference make the sum of the “neutral”...