TY  - GEN
ID  - discovery2558
A1  - Carlin, W.
A1  - Soskice, D.
TI  - The 3-equation new keynesian model - a graphical exposition
SN  - 1350-6722
Y1  - 2005/11//
AV  - public
CY  - London, UK
UR  - http://www.ucl.ac.uk/silva/economics/research/papers/working-papers-2005
T3  - Discussion Papers in Economics
N2  - 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.
PB  - Department of Economics, University College London
ER  -