<p>I will try to answer this question although it is rather hard using only one paragraph, if not impossible. A paragraph explaining what New-Keynesian Economics is:</p>

<p>Models explaining price and wage stickiness using rational expectations and utility maximizing behaviour.</p>

<p>See <a href="http://www.jstor.org/discover/10.2307/2727103?sid=21105873205523&amp;uid=3738008&amp;uid=2&amp;uid=4" rel="nofollow">Gordon, R.J, 1990</a> for more details.</p>

<p>For a defining equation the New-Keynesian Phillips curve is one of the cornerstones of New Keynesian economics:</p>

<p>$\pi_{t}=\beta E_{t}\left\{ \pi_{t+1}\right\} +\kappa x_{t}$</p>

<p>Where $x_{t}
 $ is the output gap, $\pi_{t}
 $ is inflation at time $t
 $. $\kappa=\frac{\gamma\left(1-\omega\right)\left(1-\beta\omega\right)}{\omega}
 $ which is an increasing function of firms being able to change their price that period. Note that this curve is based upon Calvo pricing but one can also use Rotemberg pricing etc.</p>

CC BY-SA 3.0
2015-02-16T12:23:01.180Z
2015-02-16T12:23:01.180Z
Plissken
<p><a href="http://press.princeton.edu/titles/8654.html">Gali's Monetary Policy, Inflation, and the Business Cycle: An Introduction to the New Keynesian Framework</a>, provides an advanced undergraduate / first-year graduate student introduction to these models, and I'd recommend it for self studies. According to <a href="http://press.princeton.edu/chapters/s8654.pdf">chapter 1, available online, which offers an overview of the  New Keynesian Model</a>, the key elements are:</p>

<ol>
<li>Structural characteristics of Real Business Cycle (RBC) Dynamic Stochastic General Equilibrium (DSGE) models</li>
<li>Monopolistic competition</li>
<li>Nominal rigidities</li>
<li>Short run non-neutrality of monetary policy</li>
</ol>

CC BY-SA 3.0
2015-02-16T13:27:20.563Z
2015-02-16T20:33:53.347Z
2015-02-16T20:33:53.347Z
BKay
<p>If you had to summarize New-Keynsian thought into one paragraph, or a set of equations, what would it be?</p>

<macroeconomics><keynesian-economics><new-keynesian-economics>
What would be the defining characteristic of New-Keynsian thought?
serakfalcon
# What would be the defining characteristic of New-Keynsian thought?

(Asked by: username_0 on 2015-02-16)

If you had to summarize New-Keynsian thought into one paragraph, or a set of equations, what would it be?

**Tags:** macroeconomics, keynesian-economics, new-keynesian-economics

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## 2 answers

### Answer by username_2 on 2015-02-16. Score: 6 | Accepted answer

[Gali's Monetary Policy, Inflation, and the Business Cycle: An Introduction to the New Keynesian Framework](http://press.princeton.edu/titles/8654.html), provides an advanced undergraduate / first-year graduate student introduction to these models, and I'd recommend it for self studies. According to [chapter 1, available online, which offers an overview of the New Keynesian Model](http://press.princeton.edu/chapters/s8654.pdf), the key elements are:

1. Structural characteristics of Real Business Cycle (RBC) Dynamic Stochastic General Equilibrium (DSGE) models
2. Monopolistic competition
3. Nominal rigidities
4. Short run non-neutrality of monetary policy


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### Answer by username_1 on 2015-02-16. Score: 3

I will try to answer this question although it is rather hard using only one paragraph, if not impossible. A paragraph explaining what New-Keynesian Economics is:

Models explaining price and wage stickiness using rational expectations and utility maximizing behaviour.

See [Gordon, R.J, 1990](http://www.jstor.org/discover/10.2307/2727103?sid=21105873205523&uid=3738008&uid=2&uid=4) for more details.

For a defining equation the New-Keynesian Phillips curve is one of the cornerstones of New Keynesian economics:

$\pi\_{t}=\beta E\_{t}\left\{ \pi\_{t+1}\right\} +\kappa x\_{t}$

Where $x\_{t}
$ is the output gap, $\pi\_{t}
$ is inflation at time $t
$. $\kappa=\frac{\gamma\left(1-\omega\right)\left(1-\beta\omega\right)}{\omega}
$ which is an increasing function of firms being able to change their price that period. Note that this curve is based upon Calvo pricing but one can also use Rotemberg pricing etc.


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