Persistent Stochastic Shocks in a New Keynesian Model with Uncertainty

1. Front Matter

   Pages I-XIII

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2. Introduction

   • Tobias Kranz

   Pages 1-2

3. New Keynesian Model

   • Tobias Kranz

   Pages 3-19

4. Persistent Shocks

   • Tobias Kranz

   Pages 20-31

5. Model with Uncertainty

   • Tobias Kranz

   Pages 32-48

6. Conclusion

   • Tobias Kranz

   Pages 49-49

7. Back Matter

   Pages 51-72

   PDF

The book introduces the New Keynesian framework, historically through a literature overview and through a step-by-step derivation of a New Keynesian Phillips curve, an intertemporal IS curve, and a targeting rule for the central bank. This basic version is then expanded by introducing cost and demand shocks and uncertainty. The latter enters the model via second order Taylor approximation instead of linearization. Bringing all equations together results in an equilibrium condition which is simulated with a wide range of parameter values, including possible crisis scenarios. The author finds that accounting for uncertainty – regarding growth and inflation expectations – can lead to lower nominal interest rates set by the central bank.

• Dynamic Stochastic General Equilibrium
• DSGE
• Equilibrium Condition
• Monetary Policy
• Numerical Simulation
• Monetary Economics

• IV/VWL, Universität Trier, Trier, Germany

  Tobias Kranz

Tobias Kranz obtained his Master of Science degree in Economics at the University of Trier in 2015. He has been working as postgraduate at the chair of Empirical Economics (University of Trier) since 2016.

 

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