A New Keynesian Workbook

Abstract

A large literature has recently developed to place the New Keynesian framework for analyzing business cycle fluctuations and the conduct of monetary policy into undergraduate economics curricula. New Keynesian models offer several attractive modeling aspects: straightforward linear specifications of structural relations, intuitive and clear dynamic properties, derivation from microfoundations. This paper provides a description of an Excel-based application that presents several versions of the New Keynesian model: static, with adaptive expectations, and with rational expectations. The latter two versions also provide dynamic descriptions of variables' evolution in terms of impulse response functions.