Monetary Policy in the New Neoclassical Synthesis: A Primer

25 Pages Posted: 5 Dec 2012

See all articles by Marvin Goodfriend

Marvin Goodfriend

Carnegie Mellon University - David A. Tepper School of Business; National Bureau of Economic Research (NBER)

Date Written: 2004

Abstract

This primer provides an understanding of the mechanics and objectives of monetary policy using a benchmark new neoclassical synthesis (NNS) macromodel. The NNS model incorporates classical features such as a real business cycle (RBC) core, and Keynesian features such as monopolistically competitive firms and costly price adjustment. Price stability maximizes welfare in the benchmark NNS model because it keeps output at its potential defined as the outcome of an imperfectly competitive RBC model with a constant markup of price over marginal cost.

Suggested Citation

Goodfriend, Marvin, Monetary Policy in the New Neoclassical Synthesis: A Primer (2004). FRB Richmond Economic Quarterly, vol. 90, no. 3, Summer 2004, pp. 21-45. Available at SSRN: https://ssrn.com/abstract=2184966

Marvin Goodfriend (Contact Author)

Carnegie Mellon University - David A. Tepper School of Business ( email )

5000 Forbes Avenue
Pittsburgh, PA 15213-3890
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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