%0 Generic
%A Carlin, W.
%A Soskice, D.
%C London, UK
%D 2005
%F discovery:2558
%I Department of Economics, University College London
%N 05-03
%T The 3-equation new keynesian model - a graphical exposition
%U https://discovery.ucl.ac.uk/id/eprint/2558/
%X We develop a graphical 3-equation New Keynesian model for macroeconomic  analysis to replace the traditional IS-LM-AS model. The new graphical  IS-PC-MR model is a simple version of the one commonly used by central  banks and captures the forward-looking thinking engaged in by the policy  maker. Within a common framework, we compare our model to other  monetary-rule based models that are used for teaching and policy analysis.  We show that the differences between the models centre on whether the central  bank optimizes and on the lag structure in the IS and Phillips curve equations.  We highlight the analytical and pedagogical advantages of our preferred  model. The model can be used to analyze the consequences of a wide range  of macroeconomic shocks, to identify the structural determinants of the coefficients  of a Taylor type interest rate rule, and to explain the origin and size of  the inflation bias.