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 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 WielandORCiDGND
URN:urn:nbn:de:hebis:30:3-252562
URL:http://www.imfs-frankfurt.de/fileadmin/user_upload/pdf/WP_52.pdf
Parent Title (German):Working paper series / Institute for Monetary and Financial Stability ; 52
Series (Serial Number):Working paper series / Institute for Monetary and Financial Stability (52)
Document Type:Working Paper
Language:English
Year of Completion:2012
Year of first Publication:2012
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
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
HeBIS-PPN:344415260
Institutes:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Wissenschaftliche Zentren und koordinierte Programme / Institute for Monetary and Financial Stability (IMFS)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
JEL-Classification:C Mathematical and Quantitative Methods / C5 Econometric Modeling / C51 Model Construction and Estimation
C Mathematical and Quantitative Methods / C5 Econometric Modeling / C52 Model Evaluation and Selection
C Mathematical and Quantitative Methods / C6 Mathematical Methods and Programming / C61 Optimization Techniques; Programming Models; Dynamic Analysis
Sammlungen:Universitätspublikationen
Licence (German):License LogoDeutsches Urheberrecht