New Keynesian Models: Not Yet Useful for Policy Analysis

Varadarajan Chari, Patrick Kehoe and Ellen McGrattan

No 14313, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: 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. Focusing on the state-of-the-art version of these models, we argue that some of its shocks and other features are not structural or consistent with microeconomic evidence. Since an accurate structural model is essential to reliably evaluate the effects of policies, we conclude that New Keynesian models are not yet useful for policy analysis.

JEL-codes: E32 E58 (search for similar items in EconPapers)
Date: 2008-09
New Economics Papers: this item is included in nep-cba, nep-dge and nep-mac
Note: EFG
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Citations: View citations in EconPapers (58)

Published as V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2009. "New Keynesian Models: Not Yet Useful for Policy Analysis," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(1), pages 242-66, January.

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