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Actually both New Keynesians, Keynesians and Monetarists are advocating for short-run government activism, just the underlying mechanisms are different and Monetarists stress monetary over fiscal policy. According to the New Palgrave Dictionary of Economics (Cagan 2017) monetarism is defined as: Monetarism is the view that the quantity of money has a major ...

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What determines interest rates? Let's try to understand the emergence of interest rates from first principles. We'll imagine an island inhabited only by Robinson Crusoe and Friday. For sustenance, they pick coconuts - the only food source available to them. Each coconut can either be consumed immediately or saved up for future use. One day, Crusoe does not ...

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Sovereign rates in developed countries represent the credit risk-free curve. What maturity on the curve you want to choose is an analytical choice. The natural rate is in reference to a risk-free curve, and so should align with the sovereign curve. Also, “Natural rate” is somewhat dated at this point, the preference is to use a more neutral term like r*.

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Cyclical unemployment $U^C$ is by definition difference between actual observed rate of employment $U$ and the natural rate of employment $U^N$ so we have: $U^C_t \equiv U_t-U_t^N$, see for example this paper. Hence cyclical unemployment can be negative if actual observed rate of unemployment is lower than natural rate, because it is defined as a difference ...

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