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The BMW Model: A New Framework for Teaching Monetary Economics

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  • Peter Bofinger
  • Eric Mayer
  • Timo Wollmersh�user

Abstract

Abstract : Although the IS/LM-AS/AD model is still the central tool of macroeconomic teaching in most macroeconomic textbooks, it has been criticized by several economists. Colander (1995) demonstrated that the framework is logically inconsistent, Romer (2000) showed that it is unable to deal with a monetary policy that uses the interest rate as its operating target, and Walsh criticized that it is not well suited for an analysis of inflation targeting. The authors present a framework that develops the Romer approach into a very simple but, at the same time, comprehensive macroeconomic model. In spite of its simplicity, it can carry the main insights of the New Keynesian macroeconomics to an intermediate level and deal with issues like inflation targeting, monetary policy rules, and central bank credibility.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal The Journal of Economic Education.

Volume (Year): 37 (2006)
Issue (Month): 1 (January)
Pages: 98-117

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Handle: RePEc:taf:jeduce:v:37:y:2006:i:1:p:98-117

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Cited by:
  1. Bofinger, Peter & Mayer, Eric, 2004. "Monetary and Fiscal Policy Interaction in the Euro Area with different assumptions on the Phillips curve," Center for European, Governance and Economic Development Research Discussion Papers 27, University of Goettingen, Department of Economics.
  2. Ábel, István & Siklos, Pierre L., 2007. "Mindentől függetlenül. A monetáris politika hatása a gazdasági ciklusra Magyarországon
    [Irrespective of everything. The effect of monetary policy on the economic cycle]
    ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(11), pages 945-959.
  3. Pavel Kapinos, 2011. "Liquidity Trap in an Inflation-Targeting Framework: A Graphical Analysis," International Review of Economic Education, Economics Network, University of Bristol, vol. 10(2), pages 91-105.
  4. Totzek, Alexander & Wohltmann, Hans-Werner, 2010. "Barro-Gordon revisited: reputational equilibria in a New Keynesian model," Economics Working Papers 2010,04, Christian-Albrechts-University of Kiel, Department of Economics.
  5. Bofinger, Peter & Mayer, Eric, 2003. "Monetary and fiscal policy interaction in the Euro area with different assumptions on the Phillips curve," W.E.P. - Würzburg Economic Papers 40, University of Würzburg, Chair for Monetary Policy and International Economics.
  6. Bofinger, Peter & Mayer, Eric, 2006. "The Svensson versus McCallum and Nelson Controversy Revisited in the BMW Framework," W.E.P. - Würzburg Economic Papers 67, University of Würzburg, Chair for Monetary Policy and International Economics.
  7. Bofinger, Peter & Mayer, Eric & Wollmershäuser, Timo, 2009. "Teaching New Keynesian Open Economy Macroeconomics at the Intermediate Level," Munich Reprints in Economics 20213, University of Munich, Department of Economics.
  8. Bofinger, Peter & Mayer, Eric, 2004. "The Stability and Growth Pact Time to Rebuild!," W.E.P. - Würzburg Economic Papers 56, University of Würzburg, Chair for Monetary Policy and International Economics.
  9. Canale, Rosaria Rita, 2008. "Equilibrium income and monetary policy strategy: teaching macroeconomics with the MP curve," MPRA Paper 12255, University Library of Munich, Germany.
  10. Canale, Rosaria Rita, 2006. "Positive effects of fiscal expansions on growth and debt," MPRA Paper 1432, University Library of Munich, Germany, revised Nov 2006.
  11. Pavel S. Kapinos, 2010. "A New Keynesian Workbook," International Review of Economic Education, Economics Network, University of Bristol, vol. 9(1), pages 111-123.

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