Farmer, Roger E. A. and Nicolò, Giovanni (2018) Keynesian economics without the Phillips curve. Journal of Economic Dynamics and Control, 89 . pp. 137-150. doi:10.1016/j.jedc.2018.01.012

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Abstract

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 New-Keynesian 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.

Item Type:	Journal Article
Subjects:	H Social Sciences > HB Economic Theory
Divisions:	Faculty of Social Sciences > Economics
Library of Congress Subject Headings (LCSH):	Keynesian economics, Phillips curve
Journal or Publication Title:	Journal of Economic Dynamics and Control
Publisher:	Elsevier BV
ISSN:	0165-1889
Official Date:	April 2018
Dates:	Date Event April 2018 Published 11 January 2018 Available 3 January 2018 Accepted
Volume:	89
Page Range:	pp. 137-150
DOI:	10.1016/j.jedc.2018.01.012
Status:	Peer Reviewed
Publication Status:	Published
Access rights to Published version:	Restricted or Subscription Access

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