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Behavioral Macroeconomics and the New Keynesian Model

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  • Jan-Oliver Menz

    ()
    (Department for Economics and Politics, University of Hamburg)

Abstract

The contribution of this paper is twofold. First, a thorough presentation of the state of the art of the New Keynesian Macroeconomic model is provided. A discussion of its empirical caveats follows and some recent extensions of the standard model are evaluated in more detail. Second, a key insight of Behavioral Economics, hyperbolic discounting, is used for the derivation of the IS Curve. It is argued that this approach is more appropriate than the usual praxis of allowing for a rule-of-thumb agent in an otherwise standard optimization framework.

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File URL: http://www.wiso.uni-hamburg.de/repec/hepdoc/macppr_4_2008.pdf
File Function: First version, 2008
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Bibliographic Info

Paper provided by Hamburg University, Department Wirtschaft und Politik in its series Macroeconomics and Finance Series with number 200804.

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Length: 24 pages
Date of creation: Dec 2008
Date of revision:
Handle: RePEc:hep:macppr:200804

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Web page: http://www.wiso.uni-hamburg.de/dwp
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Related research

Keywords: Behavioral Economics; New Keynesian Model; Rule-of-Thumbs; Hyperbolic Discounting;

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  1. Yun, Tack, 1996. "Nominal price rigidity, money supply endogeneity, and business cycles," Journal of Monetary Economics, Elsevier, vol. 37(2-3), pages 345-370, April.
  2. Thaler, Richard, 1981. "Some empirical evidence on dynamic inconsistency," Economics Letters, Elsevier, vol. 8(3), pages 201-207.
  3. Michael Woodford, 1996. "Control of the Public Debt: A Requirement for Price Stability?," NBER Working Papers 5684, National Bureau of Economic Research, Inc.
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