New Keynesian Models: Not Yet Useful for Policy Analysis

• Published in: American economic journal. Macroeconomics Vol. 1; no. 1; pp. 242 - 266
• Main Authors: Chari, V. V., Kehoe, Patrick J., McGrattan, Ellen R.
• Format: Journal Article
• Language: English
• Published: Pittsburgh American Economic Association 01.01.2009
• Subjects: Business cycles; Central banks; Economic fluctuations; Economic models; Economic policy; Equilibrium; Inflation shocks; Interest rates; Keynesianism; Macroeconomic modeling; Macroeconomics; Markups; Modeling; Monetary policy; Price shocks; Studies; Symposium; Traditions

Macroeconomists have largely converged on method, model design, reduced-form shocks, and principles of policy advice. Our main disagreements today are about implementing the methodology. Some think New Keynesian models are ready to be used for quarter-to-quarter quantitative policy advice. We do not...