DP4588 The 3-Equation New Keynesian Model: A Graphical Exposition
Author(s): | Wendy Carlin, David Soskice |
Publication Date: | September 2004 |
Keyword(s): | A22 A23, monetary policy rules, New Keynesian macroeconomics, New Keynesian Phillips curve, sticky information Phillips curve, Taylor rules |
JEL(s): | E52 |
Programme Areas: | International Macroeconomics |
Link to this Page: | cepr.org/active/publications/discussion_papers/dp.php?dpno=4588 |
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.