Fluctuation and Inflation: Keynesian Models

Fernando de Holanda Barbosa () and Luiz Antônio de Lima Junior ()
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Fernando de Holanda Barbosa: Brazilian School of Economics and Finance
Luiz Antônio de Lima Junior: Federal University of Juiz de Fora, campus Governador Valdares (Brazil)

Chapter 14 in Workbook for Macroeconomic Theory, 2025, pp 265-285 from Springer

Abstract: Abstract The Keynesian model, either old or new, has three equations: (i) an IS curve that links the real interest rate and the output gap; (ii) a Phillips curve that shows the relationship between inflation, output gap, expected inflation and past inflation; and (iii) a Taylor rule for monetary policy expressing the nominal rate of interest as a function of the past nominal rate of interest, the natural rate of interest, the inflation gap and the output gap. When the economic policy regime is one of chronic inflation, or hyperinflation, the monetary policy rule gives the amount of money issued to finance a given real public deficit and to close the model it is necessary to specify the demand equation for money.

Date: 2025
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DOI: 10.1007/978-3-031-82017-5_14

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