" Does the IS-LM model tell us what a financial crisis is"
no but we know one when we're in one
"Does the IS-LM model tell us what the policy response to such an event should be?"
yes absolutely and that is precisely the value of the model
it sufices to guide fiscal and monetary policy in a serious down turn
"Does it tell us what quantitative easing does?"
no
but
follow the Rx that jumps out at you
from hick's model and there is no need for QE
this QE gig
is a product of our ridiculous
" thru the fed only" contemporary
macronautics
in fact it's the product of 40 plus years of trashing fiscal activism
yup ever since the rise of uncle milty in the late 60's
" Does it tell us the extent of inefficiency in the US economy that monetary or fiscal policy might correct?"
no
however
obviously
in a contraction like the present one in the wake of the '08 financial crisis
ending the huge idled elements of the existing production system
is the order of the day
this is not about allocation
its about mobilization
" Does it help us understand sovereign debt problems?"
no but domar pretty much put that to rest in the mid 40's
for anyone not afraid of
accelerating the product price level climb
and pinng the nominal interest rate
Does it help us understand how to regulate the financial system?
no and like all the other no's above
just why should it ??
