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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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References listed on IDEAS
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  1. Julio J. Rotemberg & Michael Woodford, 1999. "The Cyclical Behavior of Prices and Costs," NBER Working Papers 6909, National Bureau of Economic Research, Inc.
  2. José Viñals, 2001. "Monetary Policy Issues in a Low Inflation Environment," Working Papers 0107, Banco de España;Working Papers Homepage.
  3. Edward C. Prescott, 1986. "Theory ahead of business cycle measurement," Staff Report 102, Federal Reserve Bank of Minneapolis.
  4. 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.
  5. Svensson, Lars E.O., 1998. "Inflation Targeting as a Monetary Policy Rule," Seminar Papers 646, Stockholm University, Institute for International Economic Studies.
  6. Barro, Robert J., 1977. "Long-term contracting, sticky prices, and monetary policy," Journal of Monetary Economics, Elsevier, vol. 3(3), pages 305-316, July.
  7. Mankiw, N Gregory, 1990. "A Quick Refresher Course in Macroeconomics," Journal of Economic Literature, American Economic Association, vol. 28(4), pages 1645-1660, December.
  8. David L. Reifschneider & John C. Williams, 1999. "Three lessons for monetary policy in a low inflation era," Finance and Economics Discussion Series 1999-44, Board of Governors of the Federal Reserve System (U.S.).
  9. Viñals, José, 2001. "Monetary Policy Issues in a Low Inflation Environment," CEPR Discussion Papers 2945, C.E.P.R. Discussion Papers.
  10. Hall, Robert E., 1999. "Labor-market frictions and employment fluctuations," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 17, pages 1137-1170 Elsevier.
  11. John B. Taylor, 1998. "Staggered Price and Wage Setting in Macroeconomics," NBER Working Papers 6754, National Bureau of Economic Research, Inc.
  12. V. V. Chari & Patrick J. Kehoe & Edward C. Prescott, 1988. "Time consistency and policy," Staff Report 115, Federal Reserve Bank of Minneapolis.
  13. Clarida, R. & Gali, J. & Gertler, M., 1999. "The Science of Monetary Policy: A New Keynesian Perspective," Working Papers 99-13, C.V. Starr Center for Applied Economics, New York University.
  14. Aubhik Khan & Robert G. King & Alexander L. Wolman, 2001. "Optimal monetary policy," Working Papers 01-5, Federal Reserve Bank of Philadelphia.
  15. V.V. Chari & Lawrence J. Christiano & Martin Eichenbaum, 1996. "Expectation traps and discretion," Working Paper Series, Macroeconomic Issues WP-96-5, Federal Reserve Bank of Chicago.
  16. 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.
  17. 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.
  18. Ben S. Bernanke & Mark Gertler, 1999. "Monetary policy and asset price volatility," Economic Review, Federal Reserve Bank of Kansas City, issue Q IV, pages 17-51.
  19. 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.).
  20. Marvin Goodfriend & Robert G. King, 2001. "The case for price stability," Working Paper 01-02, Federal Reserve Bank of Richmond.
  21. David Romer, 1993. "The New Keynesian Synthesis," Journal of Economic Perspectives, American Economic Association, vol. 7(1), pages 5-22, Winter.
  22. 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.
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