Advanced Search
MyIDEAS: Login to save this paper or follow this series

New Keynesian models: not yet useful for policy analysis

Contents:

Author Info

  • Ellen R. McGrattan
  • Patrick J. Kehoe
  • V. V. Chari

Abstract

In the 1970s macroeconomists often disagreed bitterly. Macroeconomists have now largely converged on method, model design, and macroeconomic policy advice. The disagreements that remain all stem from the practical implementation of the methodology. Some macroeconomists think that New Keynesian models are on the verge of being useful for quarter-to-quarter quantitative policy advice. We do not. We argue that the shocks in these models are dubiously structural and show that many of the features of the model as well as the implications due to these features are inconsistent with microeconomic evidence. These arguments lead us to conclude that New Keynesian models are not yet useful for policy analysis.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.minneapolisfed.org/publications_papers/pub_display.cfm?id=3610
Download Restriction: no

File URL: http://www.minneapolisfed.org/research/WP/WP664.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Federal Reserve Bank of Minneapolis in its series Working Papers with number 664.

as in new window
Length:
Date of creation: 2008
Date of revision:
Handle: RePEc:fip:fedmwp:664

Contact details of provider:
Postal: 90 Hennepin Avenue, P.O. Box 291, Minneapolis, MN 55480-0291
Phone: (612) 204-5000
Web page: http://minneapolisfed.org/
More information through EDIRC

Order Information:
Email:
Web: http://www.minneapolisfed.org/pubs/

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Frank Smets & Raf Wouters, 2007. "Shocks and Frictions in US Business Cycles : a Bayesian DSGE Approach," Working Paper Research, National Bank of Belgium 109, National Bank of Belgium.
  2. Mark Bils & Peter J. Klenow, 2002. "Some Evidence on the Importance of Sticky Prices," NBER Working Papers 9069, National Bureau of Economic Research, Inc.
  3. Peter N. Ireland, 2006. "Changes in the Federal Reserve's Inflation Target: Causes and Consequences," NBER Working Papers 12492, National Bureau of Economic Research, Inc.
  4. Andrew Atkeson & Patrick J. Kehoe, 2008. "On the need for a new approach to analyzing monetary policy," Staff Report, Federal Reserve Bank of Minneapolis 412, Federal Reserve Bank of Minneapolis.
  5. Emi Nakamura & Jón Steinsson, 2008. "Five Facts about Prices: A Reevaluation of Menu Cost Models," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 123(4), pages 1415-1464, November.
  6. Isabel Correia & Juan Pablo Nicolini & Pedro Teles, 2008. "Optimal fiscal and monetary policy: equivalence results," Staff Report, Federal Reserve Bank of Minneapolis 403, Federal Reserve Bank of Minneapolis.
  7. Miles S. Kimball, 1995. "The Quantitative Analytics of the Basic Neomonetarist Model," NBER Working Papers 5046, National Bureau of Economic Research, Inc.
  8. Frank Smets & Raf Wouters, 2002. "An estimated dynamic stochastic general equilibrium model of the euro area," Working Paper Research, National Bank of Belgium 35, National Bank of Belgium.
  9. Robert E. Lucas Jr. & Nancy L. Stokey, 1982. "Optimal Fiscal and Monetary Policy in an Economy Without Capital," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 532, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  10. Franco Modigliani, 1977. "The monetarist controversy; or, should we forsake stabilization policies?," Economic Review, Federal Reserve Bank of San Francisco, issue Spr suppl, pages 27-46.
  11. Mikhail Golosov & Robert E. Lucas Jr., 2007. "Menu Costs and Phillips Curves," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 115, pages 171-199.
  12. Midrigan, Virgiliu, 2006. "Menu costs, multi-product firms, and aggregate fluctuations," CFS Working Paper Series 2007/13, Center for Financial Studies (CFS).
  13. Fuhrer, Jeffrey C, 1996. "Monetary Policy Shifts and Long-Term Interest Rates," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 111(4), pages 1183-1209, November.
  14. Timothy Cogley & Argia M. Sbordone, 2005. "A search for a structural Phillips curve," Staff Reports 203, Federal Reserve Bank of New York.
  15. Lawrence J. Christiano & Martin Eichenbaum & Charles Evans, 2001. "Nominal Rigidities and the Dynamic Effects of a Shock to Monetary Policy," NBER Working Papers 8403, National Bureau of Economic Research, Inc.
  16. Noah Williams & Andrew Levin & Alexei Onatski, 2005. "Monetary Policy under Uncertainty in Micro-Founded Macroeconometric Models," Computing in Economics and Finance 2005, Society for Computational Economics 478, Society for Computational Economics.
  17. Virgiliu Midrigan, 2005. "Menu Costs, Multi-Product Firms and Aggregate Fluctuations," Macroeconomics, EconWPA 0511004, EconWPA.
  18. Yun, Tack, 1996. "Nominal price rigidity, money supply endogeneity, and business cycles," Journal of Monetary Economics, Elsevier, Elsevier, vol. 37(2-3), pages 345-370, April.
  19. Lawrence J. Christiano & Martin Eichenbaum & Robert Vigfusson, 2003. "What happens after a technology shock?," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 768, Board of Governors of the Federal Reserve System (U.S.).
  20. Mankiw, N Gregory, 2001. "The Inexorable and Mysterious Tradeoff between Inflation and Unemployment," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 111(471), pages C45-61, May.
  21. Harold L. Cole & Lee E. Ohanian, 2004. "New Deal Policies and the Persistence of the Great Depression: A General Equilibrium Analysis," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 112(4), pages 779-816, August.
  22. John C. Williams, 2013. "Monetary policy in uncertain times," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue jan21.
Full references (including those not matched with items on IDEAS)

Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Minneapolis Redux
    by Stephen Williamson in Stephen Williamson: New Monetarist Economics on 2013-12-22 22:47:00
  2. Kocherlakota Speaks
    by Agent Continuum in Agent Continuum on 2010-05-17 18:43:50
  3. Friedman vs. Microfoundations
    by YouNotSneaky! in YouNotSneaky on 2008-10-23 02:10:00
  4. Blanchard's sad state of macroeconomics
    by Economic Logician in Economic Logic on 2008-10-21 15:04:00
  5. O Que Ele Anda Lendo???
    by Angelo M. Fasolo in The Duke of Hazard on 2010-04-26 04:49:00
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is featured on the following reading lists or Wikipedia pages:
  1. Economic Logic blog

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:fip:fedmwp:664. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Janelle Ruswick).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.