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Title:The BMW model as a static approximation of a foreward-looking New Keynesian macroeconomic model PDF Logo
Authors:Bofinger, Peter
Mayer, Eric
Wollmershäuser, Timo
Issue Date:2003
Series/Report no.:Würzburg economic papers 42
Abstract:Over the last decade a new consensus model has emerged in monetary macroeconomics, labelled New Keynesian macroeconomics (Clarida et al., 1999). It consists of three simple building blocs: a forward-looking IS-equation that is derived from the optimization problem of a representative household, a forward-looking Phillips curve that maps the optimal pricing decisions of monopolistically competitive firms facing restrictions on their ability to adjust wages or prices in a flexible manner, and a relationship that describes how monetary policy is conducted. In Bofinger, Mayer and Wollmershäuser (2002a, 2002b) we developed the BMW model which takes this standard dynamic macro model to an intermediate audience in a down-to-earth fashion. This paper presents the linkages between our static BMW approach and a dynamic New Keynesian macro model.
Subjects:BMW model
New Keynesian macroeconomic model
optimal monetary policy
JEL:A20
E10
E50
F41
Document Type:Working Paper
Appears in Collections:W.E.P. - Würzburg Economic Papers, Lst. f. VWL, Geld u. internat. Wirtschaftsbeziehungen, Universität Würzburg

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