New Keynesian macroeconomics: Entry For New Palgrave Dictionary of Economics, 2nd Edition

Huw Dixon

No E2007/3, Cardiff Economics Working Papers from Cardiff University, Cardiff Business School, Economics Section

Abstract: This dictionary entry defines the development of new Keynesian macroeconomics (NKM) since the 1980s. I argue that the key defining feature NKM is the introduction of imperfect competition, making price and/or wage setting endogenous and hence allowing for a rigorous understanding of nominal rigidity. This has led to a shift away from perfect competition in macroeconomics. The combination of NKM with dynamic macroeconomic modelling has led to the current orthodoxy: the new-neoclassical synthesis. Dynamic wage and price models lead to monetary neutrality in steady-state, non-neutrality out of steady-state. Other themes in NKM include efficiency wage theory and coordination failure.

Keywords: Keynesian; nominal; rigidity; new (search for similar items in EconPapers)
JEL-codes: B22 E1 E3 E4 (search for similar items in EconPapers)
Pages: 11 pages
Date: 2007-02
New Economics Papers: this item is included in nep-cba and nep-mac
References: Add references at CitEc
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Forthcoming in New Palgrave Dictionary of Economics and Law , 2nd Edition

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