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Monetary policy in the new neoclassical synthesis : a primer

Listed author(s):
  • Marvin Goodfriend

This primer provides an understanding of the mechanics and objectives of monetary policy using a benchmark new neoclassical synthesis (NNS) macromodel. The NNS model incorporates classical features such as a real business cycle (RBC) core and Keynesian features such as monopolistically competitive firms and costly price adjustment. Price stability maximizes welfare in the benchmark NNS model because it keeps output at its potential, defined as the outcome of an imperfectly competitive RBC model with a constant mark-up of price over marginal cost. Copyright 2002 by Blackwell Publishers Ltd.

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File URL: http://www.richmondfed.org/publications/research/economic_quarterly/2004/summer/pdf/goodfriend.pdf
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Article provided by Federal Reserve Bank of Richmond in its journal Economic Quarterly.

Volume (Year): (2004)
Issue (Month): Sum ()
Pages: 21-45

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Handle: RePEc:fip:fedreq:y:2004:i:sum:p:21-45:n:v.90no.3
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  1. Edward C. Prescott, 1986. "Theory ahead of business cycle measurement," Staff Report 102, Federal Reserve Bank of Minneapolis.
  2. Flint Brayton & Andrew T. Levin & Ralph W. Tryon & John C. Williams, "undated". "The Evolution of Macro Models at the Federal Reserve Board," Finance and Economics Discussion Series 1997-29, Board of Governors of the Federal Reserve System (U.S.).
  3. Taylor, John B., 1999. "Staggered price and wage setting in macroeconomics," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 15, pages 1009-1050 Elsevier.
  4. Aubhik Khan & Robert G. King & Alexander L. Wolman, 2001. "Optimal monetary policy," Working Papers 01-5, Federal Reserve Bank of Philadelphia.
  5. V. V. Chari & Patrick J. Kehoe & Edward C. Prescott, 1988. "Time consistency and policy," Staff Report 115, Federal Reserve Bank of Minneapolis.
  6. V. V. Chari & Lawrence J. Christiano & Martin Eichenbaum, 1996. "Expectation Traps and Discretion," NBER Working Papers 5541, National Bureau of Economic Research, Inc.
  7. Lars E.O. Svensson, 1998. "Inflation Targeting as a Monetary Policy Rule," NBER Working Papers 6790, National Bureau of Economic Research, Inc.
  8. José Viñals, 2001. "Monetary Policy Issues in a Low Inflation Environment," Working Papers 0107, Banco de España;Working Papers Homepage.
  9. Mark Gertler & Jordi Gali & Richard Clarida, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1661-1707, December.
  10. Mankiw, N Gregory, 1990. "A Quick Refresher Course in Macroeconomics," Journal of Economic Literature, American Economic Association, vol. 28(4), pages 1645-1660, December.
  11. Blanchard, Olivier Jean & Kiyotaki, Nobuhiro, 1987. "Monopolistic Competition and the Effects of Aggregate Demand," American Economic Review, American Economic Association, vol. 77(4), pages 647-666, September.
  12. Ben Bernanke & Mark Gertler, 2000. "Monetary Policy and Asset Price Volatility," NBER Working Papers 7559, National Bureau of Economic Research, Inc.
  13. Viñals, José, 2001. "Monetary Policy Issues in a Low Inflation Environment," CEPR Discussion Papers 2945, C.E.P.R. Discussion Papers.
  14. Barro, Robert J., 1977. "Long-term contracting, sticky prices, and monetary policy," Journal of Monetary Economics, Elsevier, vol. 3(3), pages 305-316, July.
  15. Long, John B, Jr & Plosser, Charles I, 1983. "Real Business Cycles," Journal of Political Economy, University of Chicago Press, vol. 91(1), pages 39-69, February.
  16. Marvin Goodfriend & Robert G. King, 2001. "The case for price stability," Working Paper 01-02, Federal Reserve Bank of Richmond.
  17. Ireland, Peter N, 1996. "The Role of Countercyclical Monetary Policy," Journal of Political Economy, University of Chicago Press, vol. 104(4), pages 704-723, August.
  18. McCallum, Bennett T., 1999. "Issues in the design of monetary policy rules," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 23, pages 1483-1530 Elsevier.
  19. David L. Reifschneider & John C. Williams, 2000. "Three lessons for monetary policy in a low-inflation era," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, pages 936-978.
  20. Robert E. Hall, 1998. "Labor-Market Frictions and Employment Fluctuations," NBER Working Papers 6501, National Bureau of Economic Research, Inc.
  21. Rotemberg, Julio J. & Woodford, Michael, 1999. "The cyclical behavior of prices and costs," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 16, pages 1051-1135 Elsevier.
  22. David Romer, 1993. "The New Keynesian Synthesis," Journal of Economic Perspectives, American Economic Association, vol. 7(1), pages 5-22, Winter.
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