Creator

• Chari, V. V.
• Kehoe, Patrick J.
• McGrattan, Ellen R.

Series

• Staff report (Federal Reserve Bank of Minneapolis. Research Department)

Issue number

• 409

Date Created

• 2008-08-22

Abstract

• Macroeconomists have largely converged on method, model design, reduced-form shocks, and principles of policy advice. Our main disagreements today are about implementing the methodology. Some think New Keynesian models are ready to be used for quarter-to-quarter quantitative policy advice; we do not. Focusing on the state-of-the-art version of these models, we argue that some of its shocks and other features are not structural or consistent with microeconomic evidence. Since an accurate structural model is essential to reliably evaluate the effects of policies, we conclude that New Keynesian models are not yet useful for policy analysis.

Subject (JEL)

• E60 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General
• E12 - General Aggregative Models: Keynes; Keynesian; Post-Keynesian

Related information

• Published in: American Economic Journal: Macroeconomics (Vol. 1, No. 1, January 2009, pp. 242-266) https://doi.org/10.1257/mac.1.1.242.

  An earlier version of this Staff Report circulated as Working Paper 664.

  Additional Files

  M-files and Ftools

Date Modified

• 09/11/2020

Corporate Author

• Federal Reserve Bank of Minneapolis. Research Department

Publisher

• Federal Reserve Bank of Minneapolis

Resource type

• Research Paper

DOI

•  https://doi.org/10.21034/sr.409

License

• Creative Commons BY-NC Attribution-NonCommercial 4.0 International

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• Staff Reports

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