# Tag Info

Accepted

### Basic New Keynesian Model: Why variables are defined by integral equations

First of all, this is not something special to "the basic New Keynesian Model". It is a commonly used technique when modeling an economy with competitive environment. In your case, the author wrote ...
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### Intuition for the CES consumption index in New-Keynesian DSGE models

Heuristically, you can think of the integral as just a sum: $$\bar{C} = \left( \sum_{i=1}^n C_i^{1-\frac{1}{\epsilon}} \right)^{\frac{\epsilon}{\epsilon - 1}}$$ where $\bar{C}$ is an index of ...
Accepted

### Intuition for effect of interest rate changes in New Keynesian model

Yes the 'standard story' you reference is the correct intuition here. Lower nominal interest rate encourage consumption which puts pressure on both output and prices. Household can actually save and ...
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### The new Keynesian IS curve: What determines output?

The solution to your question is price stickiness, or as the author calls it staggered pricing. Let's assume a typical question in the Basic New Kenesian DSGE Model: What happens when a technological ...

### About marginal cost setting on Jordi Gali's work

The equation is in logs. Thus, $$MC_{t}=\frac{W_{t}/P_{t}}{MPN_{t}}$$ $$mc_{t} = w_{t}-p_{t}-mpn_{t}$$ And after that use $$MPN_{t} = (1-\alpha)\frac{Y_{t}}{N_{t}} = (1-\alpha)A_{t}N_{t}^{-\alpha}$$ ...

### Basic New Keynesian model with flexible price

I think what you are looking for is a standard RBC-model. Because the main step, going from RBC to New Keynesian, is to include Calvo pricing among other things. This is covered in many textbooks like ...
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### Deriving optimality conditions in the New Keynesian model framework with an undefined consumption function

I'm not quite sure what $Z$ stands for in this model (looks like some kind of multiplier over the standard utility) but I can generally guess the rest. $C$ stands for consumption, $L$ for real money ...

### What are the major flaws of the RBC model and how does the New Keynesian model address them?

Following Galí (2015, p.3) the RBC model rests in three major assumptions: i) the efficiency of business cycle, ii) technology shocks as source of economic fluctuations, iii) the limited role of ...
1 vote

### How were unit labor costs estimated by Gali and Gertler (1999)?

In Galı́ & Gertler (1999) the authors state that marginal costs is given by: $$MC_t = \frac{S_t}{\alpha}$$ where $\alpha$ is the labor elasticity (from the Cobb-Douglas prod. function), and $S_t$ ...
1 vote
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### Why Keynesians prefer short run measures despite straight long-run Phillips curve?

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 ...
1 vote
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### Why consumption is defined as $C_t:= \left(\int^1_0C_t(i)^{\frac{\epsilon-1}{\epsilon}}di\right)^{\frac{\epsilon}{\epsilon-1}}$

For some reason Ubiquitous edited this information into the question, rather posting it as an answer: $i$ indexes the goods available for consumption Integrals are just sums with a lot of ...

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