Keynesian Economics without the Phillips Curve

Roger Farmer and Giovanni Nicolò

No 23837, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: E0 E12 E52 (search for similar items in EconPapers)
Date: 2017-09
New Economics Papers: this item is included in nep-mac
Note: EFG ME
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Citations: View citations in EconPapers (2)

Published as Roger E.A. Farmer & Giovanni Nicolò, 2018. "Keynesian Economics Without the Phillips Curve," Journal of Economic Dynamics and Control, .

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