The New Keynesian Theory And Its Associated Model

The basic new Keynesian model rendered in this paper, as well as the analysis of the reaction of economic variables to the occurrence of a structural, monetary policy shock, strengthen the hypothesis exposed at pure theoretical level, namely the active role of Central Banks in economy, the classical dichotomy between the nominal and the real economic factors being abandoned. As reflected by the impulse-response function graphs, the model endogenous variables: output, output gap, labour hours, inflation rate, nominal interest rate and real interest rate, clearly react to the exogenous variables of the same, represented by structural shocks, returning afterwards, more or less quickly, to their initial steady state. In compliance with the literature in the matter, the monetary entity policies, although having a lower impact than the one generated by the technological changes, manifest obvious influences on the model variables, therefore affecting both the decisions of the representative agents, at microeconomic level, and the aggregate economy, as a whole.