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A Review on Output-Inflation Trade-off Based on New Classical and New Keynesian Theories

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  • Sim, Chong Yang

Abstract

Any economy is potentially subject to demand-side and supply-side shocks, which may cause output and inflation fluctuations. Thus, most economies have some form of macroeconomic stabilisation policies in place to regulate economic fluctuations. Although macroeconomic stabilisation policies are widely used to stabilise the economic fluctuations in an economy, their effectiveness has proven to be somewhat mixed in past literature. Accordingly, this has led to a long-standing debate between the advocates of interventionism and non-interventionism over the past few decades, particularly between the contending views of new classical and new Keynesians. This paper provides a review of literature on output-inflation trade-off based on new classical and new Keynesian views as an attempt to shed light on this matter.

Suggested Citation

  • Sim, Chong Yang, 2021. "A Review on Output-Inflation Trade-off Based on New Classical and New Keynesian Theories," MPRA Paper 105767, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:105767
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    References listed on IDEAS

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    More about this item

    Keywords

    New classical; New Keynesian; demand management policy; output; inflation; trade-off;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination

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