THE NEW KEYNESIAN THEORY AND ITS ASSOCIATED MODEL

Oana Simona Hudea
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Oana Simona Hudea: University of Bucharest, Romania

Network Intelligence Studies, 2016, issue 8, 151-159

Abstract: The basic new Keynesian model rendered in this paper, as well as the analysis of the reaction of economic variables to the occurrence of a structural, monetary policy shock, strengthen the hypothesis exposed at pure theoretical level, namely the active role of Central Banks in economy, the classical dichotomy between the nominal and the real economic factors being abandoned. As reflected by the impulse-response function graphs, the model endogenous variables: output, output gap, labour hours, inflation rate, nominal interest rate and real interest rate, clearly react to the exogenous variables of the same, represented by structural shocks, returning afterwards, more or less quickly, to their initial steady state. In compliance with the literature in the matter, the monetary entity policies, although having a lower impact than the one generated by the technological changes, manifest obvious influences on the model variables, therefore affecting both the decisions of the representative agents, at microeconomic level, and the aggregate economy, as a whole.

Keywords: New Keynesian model; Dynamic Stochastic General Equilibrium model; Price stickiness; Monopolistic competition; Monetary policy shock (search for similar items in EconPapers)
JEL-codes: B22 B23 C54 E12 E52 E58 (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:cmj:networ:y:2016:i:8:p:151-159

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