DSGE models · Sources
New Keynesian Core sources, papers, and evidence trail
Primary papers, model variants, source notes, and review signals behind the New Keynesian Core page.
References
Academic and research sources
Peer-reviewed papers, books, and research used to ground model mechanisms or contested interpretations.
[S1] Journal of Economic Literature
The Science of Monetary Policy
Compact New Keynesian policy framework.
Academic - Journal of Economic Literature - dated 1999
[S2] Princeton University Press
Interest and Prices
Woodford's modern monetary-policy treatment.
Academic - Princeton University Press - dated 2003
Reference sources
Reference material used for orientation; read primary and academic sources first when claims conflict.
[S3] Reference
Calvo (1983) -- Staggered Prices in a Utility-Maximizing Framework, introduced the random price-adjustment friction.
Reference
[S4] Reference
Taylor (1993) -- Discretion versus Policy Rules in Practice, proposed the Taylor rule for monetary policy.
Reference
[S5] Reference
Clarida, Gali, and Gertler (1999) -- The Science of Monetary Policy: A New Keynesian Perspective, canonical three-equation NK synthesis.
Reference
[S6] Reference
Woodford (2003) -- Interest and Prices, the definitive treatise on NK monetary theory.
Reference
[S7] Reference
Gali (2015) -- Monetary Policy, Inflation, and the Business Cycle (2nd ed.), standard textbook treatment.
Reference
[S8] Reference
Smets and Wouters (2007) -- Shocks and Frictions in US Business Cycles: A Bayesian DSGE Approach, the medium-scale estimation benchmark.
Reference
Research footing
Evidence and data
Use output gaps, inflation, policy rates, expectations, and price rigidity evidence to discipline the three-equation core.
Calibration or measurement
Price stickiness, policy-rule coefficients, discounting, and intertemporal substitution set the transmission pattern.
Boundaries
- Financial frictions are not automatic.
- Supply chains and sectoral heterogeneity are compressed.
- Expectations assumptions are decisive.
Use guidance
- When sufficient
- Short-run business-cycle responses to monetary, fiscal, and technology shocks when expectations are forward-looking and nominal rigidities anchor inflation. The model handles the full three-equation core plus investment, habits, and partial indexation when estimated in the Smets-Wouters 2003/2007 form. The right tool when the question requires quantifying impulse responses to identified shocks in a framework with microfounded price and wage setting.
- When sketch only
- Do not use as the primary tool for questions involving financial-crisis amplification, meaningful household wealth heterogeneity, or the cross-sectional distribution of income. The representative-agent assumption compresses all distributional channels; financial frictions require an additional credit block beyond the basic NK structure.
- When to switch
- Switch to a financial-accelerator DSGE (dsge:financial-accelerator) when credit spreads and balance-sheet amplification drive the cycle. Switch to HANK (dsge:hank-lite) when the distribution of liquid wealth across households is central to the aggregate demand response. Switch to dsge:soe-nk when the economy is small and open and exchange-rate dynamics are decisive.
- Falsification signal
- Monetary-shock impulse responses with signs or magnitudes that are systematically inconsistent with the model's predictions across plausible identification schemes falsify the structural parameterization. A persistent price puzzle, where a contractionary shock raises inflation for several quarters before any decline, indicates the policy-rule equation or the information set is misspecified, not minor measurement noise.
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Concepts, data, and nearby models
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