Behavioral Macroeconomics and the New Keynesian Model

Jan-Oliver Menz ()

No 200804, Macroeconomics and Finance Series from Hamburg University, Department Wirtschaft und Politik

Abstract: The contribution of this paper is twofold. First, a thorough presentation of the state of the art of the New Keynesian Macroeconomic model is provided. A discussion of its empirical caveats follows and some recent extensions of the standard model are evaluated in more detail. Second, a key insight of Behavioral Economics, hyperbolic discounting, is used for the derivation of the IS Curve. It is argued that this approach is more appropriate than the usual praxis of allowing for a rule-of-thumb agent in an otherwise standard optimization framework.

Keywords: Behavioral Economics; New Keynesian Model; Rule-of-Thumbs; Hyperbolic Discounting (search for similar items in EconPapers)
JEL-codes: D91 E21 D8 D03 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cbe, nep-hpe and nep-mac
Date: 2008-12
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http://www.wiso.uni-hamburg.de/repec/hepdoc/macppr_4_2008.pdf First version, 2008 (application/pdf)

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Persistent link: http://EconPapers.repec.org/RePEc:hep:macppr:200804

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