IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

New-Keynesian Economics: An AS-AD View

  • Pierpaolo Benigno

A simple New-Keynesian model is set out with AS-AD graphical analysis. The model is consistent with modern central banking, which targets shortterm nominal interest rates instead of money supply aggregates. This simple framework enables us to analyze the economic impact of productivity or markup disturbances and to study alternative monetary and fiscal policies. The framework is also suitable for studying a liquidity-trap environment, the economics of debt deleveraging, and possible solutions. The impact of the fiscal multipliers on output and the output gap can be quantified. During normal times, a short-run increase in public spending has a multiplier less than one on output and a much smaller multiplier on the output gap, while a decrease in short-run taxes has a positive multiplier on output, but negative on the output gap. When the economy is depressed because some agents are deleveraging, fiscal policy is more powerful and the multiplier can be quite big. In the AS-AD graphical view, optimal policy simplifies to nothing more than an additional line, IT, along which the trade-off between the objective of price stability and that of stabilizing the output gap can be optimally exploited.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.nber.org/papers/w14824.pdf
Download Restriction: no

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14824.

as
in new window

Length:
Date of creation: Mar 2009
Date of revision:
Handle: RePEc:nbr:nberwo:14824
Note: EFG IFM ME
Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Web page: http://www.nber.org
Email:


More information through EDIRC

References listed on IDEAS
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.:

as in new window
  1. Benigno, Pierpaolo & Woodford, Michael, 2004. "Optimal monetary and fiscal policy: a linear-quadratic approach," Working Paper Series 0345, European Central Bank.
  2. Krugman, Paul, 2000. "How Complicated Does the Model Have to Be?," Oxford Review of Economic Policy, Oxford University Press, vol. 16(4), pages 33-42, Winter.
  3. N. Gregory Mankiw, 2006. "The Macroeconomist as Scientist and Engineer," Journal of Economic Perspectives, American Economic Association, vol. 20(4), pages 29-46, Fall.
  4. Pierpaolo Benigno & Michael Woodford, 2004. "Inflation stabilization and welfare: The case of a distorted steady state," Discussion Papers 0405-04, Columbia University, Department of Economics.
  5. 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.
  6. Clarida, Richard & Galí, Jordi & Gertler, Mark, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," CEPR Discussion Papers 2139, C.E.P.R. Discussion Papers.
  7. Giancarlo Corsetti & Paolo Pesenti, 2009. "The Simple Geometry of Transmission and Stabilization in Closed and Open Economies," NBER Chapters, in: NBER International Seminar on Macroeconomics 2007, pages 65-116 National Bureau of Economic Research, Inc.
  8. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
  9. Carlin, Wendy & Soskice, David, 2004. "The 3-Equation New Keynesian Model: A Graphical Exposition," CEPR Discussion Papers 4588, C.E.P.R. Discussion Papers.
  10. Frederic S. Mishkin & Klaus Schmidt-Hebbel D., 2006. "Monetary Policy Under Inflation Targeting: An Introduction," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 9(3), pages 5-17, December.
  11. Marvin Goodfriend & Robert King, 1997. "The New Neoclassical Synthesis and the Role of Monetary Policy," NBER Chapters, in: NBER Macroeconomics Annual 1997, Volume 12, pages 231-296 National Bureau of Economic Research, Inc.
  12. Goodfriend, Marvin, 2002. "Monetary Policy in the New Neoclassical Synthesis: A Primer," International Finance, Wiley Blackwell, vol. 5(2), pages 165-91, Summer.
  13. Paul R. Krugman, 1998. "It's Baaack: Japan's Slump and the Return of the Liquidity Trap," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(2), pages 137-206.
  14. David Romer, 2000. "Keynesian Macroeconomics without the LM Curve," NBER Working Papers 7461, National Bureau of Economic Research, Inc.
  15. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 195-214, December.
  16. Ben S. Bernanke & Frederic S. Mishkin, 1997. "Inflation Targeting: A New Framework for Monetary Policy?," Journal of Economic Perspectives, American Economic Association, vol. 11(2), pages 97-116, Spring.
  17. Yun, Tack, 1996. "Nominal price rigidity, money supply endogeneity, and business cycles," Journal of Monetary Economics, Elsevier, vol. 37(2-3), pages 345-370, April.
  18. Dixit, Avinash K & Stiglitz, Joseph E, 1975. "Monopolistic Competition and Optimum Product Diversity," The Warwick Economics Research Paper Series (TWERPS) 64, University of Warwick, Department of Economics.
  19. Gauti B. Eggertsson, 2006. "Was the New Deal contractionary?," Staff Reports 264, Federal Reserve Bank of New York.
  20. Taylor, John B, 1979. "Staggered Wage Setting in a Macro Model," American Economic Review, American Economic Association, vol. 69(2), pages 108-13, May.
  21. Rotemberg, Julio J, 1982. "Monopolistic Price Adjustment and Aggregate Output," Review of Economic Studies, Wiley Blackwell, vol. 49(4), pages 517-31, October.
  22. Mark Gertler & Kenneth Rogoff, 2004. "NBER Macroeconomics Annual 2003, Volume 18," NBER Books, National Bureau of Economic Research, Inc, number gert04-1.
  23. Carl E. Walsh, 2002. "Teaching Inflation Targeting: An Analysis for Intermediate Macro," The Journal of Economic Education, Taylor & Francis Journals, vol. 33(4), pages 333-346, December.
  24. Marc P. Giannoni & Michael Woodford, 2003. "Optimal Interest-Rate Rules: I. General Theory," NBER Working Papers 9419, National Bureau of Economic Research, Inc.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:14824. 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 you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.