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The perils of first-order conditions of New Keynesian models

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  • Kim, Minseong

Abstract

For deriving equilibrium of sticky-price/monopolistic competition New Keynesian models, first-order conditions are often used. This paper shows that they may not be sufficient and presents a case out of a simple model where there exists no equilibrium. This is true even when Taylor rule is assumed.

Suggested Citation

  • Kim, Minseong, 2016. "The perils of first-order conditions of New Keynesian models," MPRA Paper 70753, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:70753
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    References listed on IDEAS

    as
    1. Kim, Minseong, 2016. "How accounting accuracy affects DSGE models," MPRA Paper 70356, University Library of Munich, Germany.
    2. Galí, Jordi, 2020. "The effects of a money-financed fiscal stimulus," Journal of Monetary Economics, Elsevier, vol. 115(C), pages 1-19.
    3. Kim, Minseong, 2016. "How accounting accuracy affects DSGE models," MPRA Paper 70404, University Library of Munich, Germany.
    4. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
    5. Rotemberg, Julio J, 1982. "Sticky Prices in the United States," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1187-1211, December.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    New Keynesian; sticky price; monopolistic competition; consistency; first-order conditions;
    All these keywords.

    JEL classification:

    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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