Keynesian Economics without the Phillips Curve / Roger E.A. Farmer, Giovanni Nicolò.

Format:

Book

Author/Creator:

Farmer, Roger E.A.

Contributor:

National Bureau of Economic Research.

Nicolò, Giovanni.

Series:

Working Paper Series (National Bureau of Economic Research) no. w23837.

NBER working paper series no. w23837

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2017.

Summary:

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.

Notes:

Print version record

September 2017.