New Perspectives on Monetary Policy, Inflation, and the Business Cycle

In recent years, the field of macroeconomics has witnessed the development of a new generation of small-scale monetary business cycle models, generally referred to as New Keynesian (NK) models or New Neoclassical Synthesis models. The new models integrate Keynesian elements (imperfect competition, and nominal rigidities) into a dynamic general equilibrium framework that until recently was largely associated with the Real Business Cycle (RBC) paradigm. They can be used (and are being used) to analyze the connection among money, inflation, and the business cycle, and to assess the desirability of alternative monetary policies.