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Discussion Paper Details

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Title: The 3-Equation New Keynesian Model: A Graphical Exposition

Author(s): Wendy Carlin and David Soskice

Publication Date: September 2004

Keyword(s): A22 A23, monetary policy rules, New Keynesian macroeconomics, New Keynesian Phillips curve, sticky information Phillips curve and Taylor rules

Programme Area(s): International Macroeconomics

Abstract: We develop a graphical 3-equation New Keynesian model for macroeconomic analysis to replace the traditional IS-LM-AS model. The new graphical IS-PC-MR model is a simple version of the one commonly used in central banks and captures the forward-looking thinking engaged in by the policy-maker. We show how it can be modified to include a forward-looking IS curve and how it relates to current debates in monetary macroeconomics, including the New Keynesian Phillips Curve and the Sticky Information Phillips Curve models.

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Bibliographic Reference

Carlin, W and Soskice, D. 2004. 'The 3-Equation New Keynesian Model: A Graphical Exposition'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=4588