The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

New Keynesian Macroeconomics

  • Huw David Dixon
Reference work entry


The term ‘new Keynesian economics’ refers to a body of work done by macroeconomists in the late 1970s and 1980s in which the notion of imperfect competition was introduced into macroeconomics in order to provide a micro-foundation for nominal rigidities and also to provide an alternative to supply-equals-demand equilibrium. This led in the 1990s to the new-neoclassical-synthesis approach to monetary economics in which dynamic pricing models have become central to our understanding how monetary policy influences output and inflation. Other themes in the new Keynesian approach include the effect of imperfect competition on the fiscal multiplier, and coordination failures.


Adaptive expectations Aggregate supply and demand models Balanced budget multiplier Competitive equilibrium Constant hazard rate models Consumer surplus Coordination failure Efficiency wages Envelope theorem Extrinisic and intrinsic uncertainty Hybrid Phillips curve Imperfect competition Inflation Invisible auctioneer IS–LM model Keynesian Revolution Menu costs Microfoundations Monetary transmission mechanism Monopolistic competition Monopoly Neoclassical synthesis Neutrality of money New classical macroeconomics New Keynesian macroeconomics New Keynesian Phillips curve New neoclassical synthesis Nominal rigidities Perfect competition Phillips curve Price indexation Price making Price rigidity Price taking Rational expectations Real business cycles Real rigidities Representative agent s-S models Staggered price-setting Staggered wage-setting State-dependent pricing Strategic complementarity Taylor principle Time-dependent models Wage indexation Wage rigidity 

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© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Huw David Dixon
    • 1
  1. 1.