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• W1511891055 abstract "This essay presents a brief discussion of the foundations and scope of the new Keynesian model for monetary policy. The model is built according to methodology accepted by the scientific community, based on the so-called “microfoundations”; however, as it aims to address monetary policy issues –through forecasting or simulation exercises– it tends to sacrifice its original rigour in exchange for empirical goodness of fit or economic relevance. The latter is largely associated to: the degree to which nominal rigidities are significant to explain the dynamics of variables of interest, as they generate non-neutrality results and determine the space of welfare-improving interventions; and the use of a simple rule –the interest rate as a function of macroeconomic variables– as a valid depiction of monetary policy. Policy prescriptions are highly specific to any of these two conditions, especially in open economies. Finally, either from a realist methodological point of view, which stresses empirical hypotheses’ contrast, or from a constructivist one, which assesses its rhetoric, the model presents limitations in its approach to central banks’ practice and discourse." @default.
• W1511891055 created "2016-06-24" @default.
• W1511891055 creator A5086021188 @default.
• W1511891055 date "2011-01-01" @default.
• W1511891055 modified "2023-09-24" @default.
• W1511891055 title "On the “Science” of Monetary Policy: Methodological Notes" @default.
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