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A Review on Output-Inflation Trade-off Based on New Classical and New Keynesian Theories

Chong Yang Sim

MPRA Paper from University Library of Munich, Germany

Abstract: Any economy is potentially subject to demand-side and supply-side shocks, which may cause output and inflation fluctuations. Thus, most economies have some form of macroeconomic stabilisation policies in place to regulate economic fluctuations. Although macroeconomic stabilisation policies are widely used to stabilise the economic fluctuations in an economy, their effectiveness has proven to be somewhat mixed in past literature. Accordingly, this has led to a long-standing debate between the advocates of interventionism and non-interventionism over the past few decades, particularly between the contending views of new classical and new Keynesians. This paper provides a review of literature on output-inflation trade-off based on new classical and new Keynesian views as an attempt to shed light on this matter.

Keywords: New classical; New Keynesian; demand management policy; output; inflation; trade-off (search for similar items in EconPapers)
JEL-codes: C22 E23 E31 E61 (search for similar items in EconPapers)
Date: 2021-02-05
New Economics Papers: this item is included in nep-mac and nep-mon
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