Teaching Intermediate Macroeconomics using the 3-Equation Model
Wendy Carlin () and
David Soskice
Chapter 1 in Macroeconomic Theory and Macroeconomic Pedagogy, 2009, pp 13-35 from Palgrave Macmillan
Abstract:
Abstract Much teaching of intermediate macroeconomics uses the IS-LM-AS or AD-AS approach. This is far removed both from the practice of interest rate setting, inflation-targeting central banks and from the models that are taught in graduate courses. Modern monetary macroeconomics is based on what is increasingly known as the 3-equation New Keynesian model: IS curve, Phillips curve and interest rate-based monetary policy rule (IS-PC-MR). This is the basic analytical structure of Michael Woodford’s book Interest and Prices published in 2003 and, for example, of the widely cited paper ‘The New Keynesian Science of Monetary Policy’ by Clarida et al. published in the Journal of Economic Literature in 1999. A recent graduate textbook treatment is Galí (2008). Much of this literature is inaccessible to undergraduates and non-specialists. Our aim is to show how this divide can be bridged in a way that retains the tractability and policy-friendliness of the old approach yet fits the institutional realities of contemporary policy-making and opens the way to the more advanced literature.
Keywords: Interest Rate; Monetary Policy; Central Bank; Aggregate Demand; Phillips Curve (search for similar items in EconPapers)
Date: 2009
References: Add references at CitEc
Citations: View citations in EconPapers (11)
There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-29166-9_2
Ordering information: This item can be ordered from
http://www.palgrave.com/9780230291669
DOI: 10.1007/978-0-230-29166-9_2
Access Statistics for this chapter
More chapters in Palgrave Macmillan Books from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().