The Analytics of the New Keynesian 3-Equation Model
Poutineau, J. C., & Sobczak, K & Vermandel, G. (2015). The analytics of the New Keynesian 3-equation Model. Economics and Business Review, Vol. 1 (15), No. 2, 2015: 110–129.
28 Pages Posted: 26 Sep 2015
Date Written: January 25, 2015
This paper aims at providing a self contained presentation of the ideas and solution procedure of New Keynesian Macroeconomics models. Using the benchmark “3 equation model”, we introduce the reader to an intuitive, static version of the model before incorporating more technical aspects associated with the dynamic nature of the model. We then discuss the relative contribution of supply, demand and policy shocks to the fluctuations of activity, inflation and interest rate, depending on the key underlying parameters of the economy.
Keywords: dynamic IS curve, impulse response analysis, New Keynesian Macro-economics, New Keynesian Phillips Curve, output gap, Taylor rule
JEL Classification: C63, E12, E32, E52
Suggested Citation: Suggested Citation