The new consensus from a traditional keynesian and post-keynesian perspective. A worthwhile foundation for research or just a waste of time?
"New Keynesian DSGE models propose a dynamic and expectational version of the old IS-LM paradigm. Acknowledging that the Taylor rule as a substitute for the LM-curve has its merits we show that standard DSGE models do not model how the central bank achieves its targets. In filling this gap we m...
| Main Author: | |
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| Institution: | ETUI-European Trade Union Institute |
| Format: | TEXT |
| Language: | English |
| Published: |
Düsseldorf
2009
HBS |
| Subjects: | |
| Online Access: | https://www.labourline.org/KENTIKA-19186546124919047289-The-new-consensus-from-a-tradi.htm |
| Summary: | "New Keynesian DSGE models propose a dynamic and expectational version of the old IS-LM paradigm. Acknowledging that the Taylor rule as a substitute for the LM-curve has its merits we show that standard DSGE models do not model how the central bank achieves its targets. In filling this gap we make evident that models neglecting a store-of-value function of money but still assuming a Taylor rule are inconsistent. Our major point concerns the-so called new Keynesian IS-curve. We prove that DSGE models which typically rest on the assumption of representative agents are unable to derive the IS-curve. This implies that these models lack the capability to analyse the role of savings as a a gap in aggregate demand. By assuming overlapping generations we make evident how this shortcoming can be avoided. We also show how OLG models add a richer dynamics to the standard DSGE approach. " |
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| Physical Description: | 26 p. Digital |