The New Neoclassical Synthesis and the Role of Monetary Policy
In: NBER Macroeconomics Annual 1997, Volume 12
Macroeconomics is moving toward a New Neoclassical Synthesis, which like the synthesis of the 1960s melds Classical with Keynesian ideas. This paper describes the key features of the new synthesis and its implications for the role of monetary policy. We find that the New Neoclassical Synthesis rationalizes an activist monetary policy which is a simple system of inflation targets. Under this "neutral" monetary policy, real quantities evolve as suggested in the literature on real business cycles. Going beyond broad principles, we use the new synthesis to address several operational aspects of inflation targeting. These include its practicality, the response to oil shocks, the choice of price index, the design of a mandate, and the tactics of interest rate policy.
(This abstract was borrowed from another version of this item.)
|This chapter was published in: ||This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number
11040.||Handle:|| RePEc:nbr:nberch:11040||Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Blanchard, Olivier Jean & Kiyotaki, Nobuhiro, 1987. "Monopolistic Competition and the Effects of Aggregate Demand," American Economic Review, American Economic Association, vol. 77(4), pages 647-66, September.
- V. V. Chari & Lawrence J. Christiano & Patrick J. Kehoe, 1993.
"Optimal fiscal policy in a business cycle model,"
160, Federal Reserve Bank of Minneapolis.
- repec:nbr:nberre:0126 is not listed on IDEAS
- Taylor, John B, 1980.
"Aggregate Dynamics and Staggered Contracts,"
Journal of Political Economy,
University of Chicago Press, vol. 88(1), pages 1-23, February.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberch:11040. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.