The new keynesian approach to dynamic general equilibrium modeling: models, methods, and macroeconomic policy evaluation

This chapter aims to provide a hands-on approach to New Keynesian models and their
uses for macroeconomic policy analysis. It starts by reviewing the origins of the New Keynesian
approach, the key model ingredients and r
This chapter aims to provide a hands-on approach to New Keynesian models and their
uses for macroeconomic policy analysis. It starts by reviewing the origins of the New Keynesian
approach, the key model ingredients and representative models. Building blocks of
current-generation dynamic stochastic general equilibrium (DSGE) models are discussed in
detail. These models address the famous Lucas critique by deriving behavioral equations
systematically from the optimizing and forward-looking decision-making of households and
firms subject to well-defined constraints. State-of-the-art methods for solving and estimating
such models are reviewed and presented in examples. The chapter goes beyond the mere
presentation of the most popular benchmark model by providing a framework for model
comparison along with a database that includes a wide variety of macroeconomic models.
Thus, it offers a convenient approach for comparing new models to available benchmarks
and for investigating whether particular policy recommendations are robust to model uncertainty.
Such robustness analysis is illustrated by evaluating the performance of simple
monetary policy rules across a range of recently-estimated models including some with financial
market imperfections and by reviewing recent comparative findings regarding the
magnitude of government spending multipliers. The chapter concludes with a discussion of
important objectives for on-going and future research using the New Keynesian framework.
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Metadaten
Author:Sebastian Schmidt, Volker Wieland
URN:urn:nbn:de:hebis:30:3-252562
Series (Serial Number):Working Paper Series : Institute for Monetary and Financial Stability (52)
Document Type:Working Paper
Language:English
Year of first Publication:2012
Publishing Institution:Univ.-Bibliothek Frankfurt am Main
Release Date:2012/07/19
Tag:Keynesian models; Monetary macroeconomics; New Keynesian models; New Neoclassical synthesis; dynamic stochastic general equilibrium models; model comparison; monetary and fiscal policy; policy evaluation; policy robustness; rational expectations
Institutes:Wirtschaftswissenschaften
Institute for Monetary and Financial Stability (IMFS)
Dewey Decimal Classification:330 Wirtschaft
JEL-Classification:C51 Model Construction and Estimation
C52 Model Evaluation and Selection
C61 Optimization Techniques; Programming Models; Dynamic Analysis
C68 Computable General Equilibrium Models
E12 Keynes; Keynesian; Post-Keynesian
E17 Forecasting and Simulation
E52 Monetary Policy
E63 Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization
Sammlungen:Universitätspublikationen
Licence (German):License Logo Veröffentlichungsvertrag für Publikationen

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