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Monetary Policy Design in the Basic New Keynesian Model
[Monetary Policy, Inflation, and the Business Cycle: An Introduction to the New Keynesian Framework]

Contents:

Author Info

  • Jordi Galí

    (Center for Research in International Economics (CREI), Universitat Pompeu Fabra, Barcelona)

Abstract

The New Keynesian framework has emerged as the workhorse for the analysis of monetary policy and its implications for inflation, economic fluctuations, and welfare. It is the backbone of the new generation of medium-scale models under development at major central banks and international policy institutions, and provides the theoretical underpinnings of the inflation stability-oriented strategies adopted by most central banks throughout the industrialized world. This graduate-level textbook provides an introduction to the New Keynesian framework and its applications to monetary policy. Using a canonical version of the New Keynesian model as a reference framework, Jordi Galí explores issues pertaining to the design of monetary policy, including the determination of the optimal monetary policy and the desirability of simple policy rules. He analyzes several extensions of the baseline model, allowing for cost-push shocks, nominal wage rigidities, and open economy factors. In each case, the implications for monetary policy are addressed, with a special emphasis on the desirability of inflation targeting policies.

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Bibliographic Info

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This chapter was published in: Jordi Galí , , pages , 2008.

This item is provided by Princeton University Press in its series Introductory Chapters with number 8654-4.

Handle: RePEc:pup:chapts:8654-4

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Web page: http://press.princeton.edu

Related research

Keywords: monetary policy; inflation; business cycle; Keynes; welfare;

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Cited by:
  1. Senbeta, Sisay, 2011. "How applicable are the new keynesian DSGE models to a typical low-income economy?," MPRA Paper 30931, University Library of Munich, Germany.
  2. Clerc, L. & Dellas, H. & Loisel, O., 2010. "To be or not to be in monetary union: A synthesis," Working papers 308, Banque de France.
  3. Blommestein, H.J. & Eijffinger, S.C.W. & Qian, Z., 2011. "Monetary Policy Rules, Adverse Selection and Long-Run Financial Risk," Discussion Paper 2011-121, Tilburg University, Center for Economic Research.
  4. Sudipto Mundle & N.R. Bhanumurthy & Surajit Das, 2010. "Fiscal Consolidation with High Growth A Policy Simulation Model for India," Working Papers id:2825, eSocialSciences.

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