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The New Keynesian Model: an Interpretation of Michael Woodford\'s \"Interest and Prices\" (In French)

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  • Martin ZUMPE

Abstract

Over the past fifteen years, the “New Keynesian Model” has occupied a central place in macro-monetary economics. Michael Woodford’s “Interest and Prices” (2003) provides the smartest and most general presentation of this model. However, due to its non-linear and somehow fragmented structure, comprehension of this work may be challenging for readers. Sketchiness of analytical resolutions is another obstacle to full understanding. In order to cope with these difficulties, this paper suggests a unified, exhaustive and detailed derivation of Woodford’s basic model. Beyond a mere re-examination of Woodford’s analytical work, the paper investigates the functioning of the model and brings to light its implicit assumptions. It also shows the absence of national savings in the model, and provides an unpublished formal expression of the transmission mechanism of monetary policy.

Suggested Citation

  • Martin ZUMPE, 2015. "The New Keynesian Model: an Interpretation of Michael Woodford\'s \"Interest and Prices\" (In French)," Cahiers du GREThA 2015-30, Groupe de Recherche en Economie Théorique et Appliquée.
  • Handle: RePEc:grt:wpegrt:2015-30
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    File URL: http://cahiersdugretha.u-bordeaux4.fr/2015/2015-30.pdf
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    References listed on IDEAS

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    1. Jordi Galí & Mark Gertler, 2007. "Macroeconomic Modeling for Monetary Policy Evaluation," Journal of Economic Perspectives, American Economic Association, vol. 21(4), pages 25-46, Fall.
    2. Martin Zumpe, 2010. "Règles de politique monétaire, apprentissage et stabilité : une revue de la littérature récente," Post-Print hal-00652950, HAL.
    3. Bullard, James & Mitra, Kaushik, 2002. "Learning about monetary policy rules," Journal of Monetary Economics, Elsevier, vol. 49(6), pages 1105-1129, September.
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    5. 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.
    6. Bennett T. McCallum & Edward Nelson, 1999. "Performance of Operational Policy Rules in an Estimated Semiclassical Structural Model," NBER Chapters,in: Monetary Policy Rules, pages 15-56 National Bureau of Economic Research, Inc.
    7. George W. Evans & Seppo Honkapohja, 2003. "Adaptive learning and monetary policy design," Proceedings, Federal Reserve Bank of Cleveland, pages 1045-1084.
    8. Carl E. Walsh, 2003. "Monetary Theory and Policy, 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232316, May.
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    10. Bruce Preston, 2005. "Learning about Monetary Policy Rules when Long-Horizon Expectations Matter," International Journal of Central Banking, International Journal of Central Banking, vol. 1(2), September.
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    12. Alan P. Kirman, 1992. "Whom or What Does the Representative Individual Represent?," Journal of Economic Perspectives, American Economic Association, vol. 6(2), pages 117-136, Spring.
    13. 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.
    14. Martin Zumpe, 2011. "Détermination, apprentissage adaptatif et règles de politique monétaire dans le nouveau modèle canonique : un guide de lecture," Post-Print hal-00652948, HAL.
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    More about this item

    Keywords

    new Keynesian model – dynamic stochastic equilibrium modelling – rational expectations – monetary policy;

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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