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The new Keynesian approach to monetary policy analysis: Lessons and new directions

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Abstract

I discuss several lessons regarding the design and conduct of monetary policy that have emerged out of the New Keynesian research program. Those lessons include the bene.ts of price stability, the gains from commitment about future policies, the importance of nat- ural variables as benchmarks for policy, and the bene.ts of a credible anti-inflationary stance. I also point to one challenge facing NK modelling efforts: the need to come up with relevant sources of policy tradeoffs. A potentially useful approach to meeting that challenge, based on the introduction of real imperfections, is presented.

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Bibliographic Info

Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 1075.

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Date of creation: Feb 2008
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Handle: RePEc:upf:upfgen:1075

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Web page: http://www.econ.upf.edu/

Related research

Keywords: Sticky prices; optimal policy; interest rate rules; policy tradeoffs; credibility; gains from commitment;

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Cited by:
  1. Clerc, Laurent & Dellas, Harris & Loisel, Olivier, 2011. "To be or not to be in monetary union: A synthesis," Journal of International Economics, Elsevier, Elsevier, vol. 83(2), pages 154-167, March.
  2. Senbeta, Sisay, 2011. "How applicable are the new keynesian DSGE models to a typical low-income economy?," MPRA Paper 30931, University Library of Munich, Germany.
  3. Blommestein, H.J. & Eijffinger, S.C.W. & Qian, Z., 2011. "Monetary Policy Rules, Adverse Selection and Long-Run Financial Risk," Discussion Paper, Tilburg University, Center for Economic Research 2011-121, Tilburg University, Center for Economic Research.
  4. Robert B. Barsky & Susanto Basu & Keyoung Lee, 2014. "Whither News Shocks?," NBER Chapters, in: NBER Macroeconomics Annual 2014, Volume 29 National Bureau of Economic Research, Inc.
  5. Sudipto Mundle & N.R. Bhanumurthy & Surajit Das, 2010. "Fiscal Consolidation with High Growth A Policy Simulation Model for India," Working Papers id:2825, eSocialSciences.

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