# Tag Info

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### 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 ...
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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 ...
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### 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 $$MPN_{t} = (1-\alpha)\frac{Y_{t}}{N_{t}} = (1-\alpha)A_{t}N_{t}^{-\alpha}$$ ...
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### 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 ...
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### 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 ...
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### Resources for a Deep Dive into the New Keynesian / DSGE models

Wickens Macroeconomic Theory: A Dynamic General Equilibrium Approach, is good resource that has what you are looking for.
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### Keynesian model functions

To get back to the original production function just multiply both sides with capital. Here: $$Y/K = A (N/K)^{1.1} = F(N/K,1) \implies Y = AN^{1.1}K^{-0.1} =F(N,K)$$ Also, the marginal product of ...
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### 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 $S_t$ ...
• 56.8k
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### Why is Keynes attacking the (neo)classical theory of interest rates on the grounds that it is indeterminate?

You can use some some initial $Y_0$ to find an interest rate, but this is precisely the indeterminacy problem. We would like to be able to derive the equilibrium interest rate without assuming some ...
• 56.8k
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 ...
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