Keynesian Economics without the Phillips Curve

Roger Farmer

No 12298, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We extend Farmer's (2012b) Monetary (FM) Model in three ways. First, we derive an analog of the Taylor Principle and we show that it fails in U.S. data. Second, we use the fact that the model displays dynamic indeterminacy to explain the real effects of nominal shocks. Third, we use the fact the model displays steady-state indeterminacy to explain the persistence of unemployment. We show that the FM model outperforms the NK model and we argue that its superior performance arises from the fact that the reduced form of the FM model is a VECM as opposed to a VAR.

Keywords: Money; Keynesian economics; Indeterminacy (search for similar items in EconPapers)
JEL-codes: E10 E12 E52 (search for similar items in EconPapers)
Date: 2017-09
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (2)

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Journal Article: Keynesian economics without the Phillips curve (2018)
Working Paper: Keynesian Economics without the Phillips Curve (2017)
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