Behavioral Macroeconomics and the New Keynesian Model
AbstractThe 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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Bibliographic InfoPaper provided by Hamburg University, Department Wirtschaft und Politik in its series Macroeconomics and Finance Series with number 200804.
Length: 24 pages
Date of creation: Dec 2008
Date of revision:
Behavioral Economics; New Keynesian Model; Rule-of-Thumbs; Hyperbolic Discounting;
Find related papers by JEL classification:
- D91 - Microeconomics - - Intertemporal Choice - - - Intertemporal Household Choice; Life Cycle Models and Saving
- E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
- D8 - Microeconomics - - Information, Knowledge, and Uncertainty
- D03 - Microeconomics - - General - - - Behavioral Microeconomics; Underlying Principles
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-01-10 (All new papers)
- NEP-CBE-2009-01-10 (Cognitive & Behavioural Economics)
- NEP-HPE-2009-01-10 (History & Philosophy of Economics)
- NEP-MAC-2009-01-10 (Macroeconomics)
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.:
- Michael Woodford, 1996. "Control of the Public Debt: A Requirement for Price Stability?," NBER Working Papers 5684, National Bureau of Economic Research, Inc.
- 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.
- Thaler, Richard, 1981. "Some empirical evidence on dynamic inconsistency," Economics Letters, Elsevier, vol. 8(3), pages 201-207.
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