| | |  | New Business | Home » » Monetary Policy, Inflation, and the Business Cycle: An Introduction to the New Keynesian Framework | | | | | | | Product Promotions: | | | | | Description: | | The New Keynesian framework has emerged as the workhorse for the analysis of monetary policy and its implications for inflation, economic fluctuations, and welfare. It is the backbone of the new generation of medium-scale models under development at major central banks and international policy institutions, and provides the theoretical underpinnings of the inflation stability-oriented strategies adopted by most central banks throughout the industrialized world. This graduate-level textbook provides an introduction to the New Keynesian framework and its applications to monetary policy. Using a canonical version of the New Keynesian model as a reference framework, Jordi Galí explores issues pertaining to the design of monetary policy, including the determination of the optimal monetary policy and the desirability of simple policy rules. He analyzes several extensions of the baseline model, allowing for cost-push shocks, nominal wage rigidities, and open economy factors. In each case, the implications for monetary policy are addressed, with a special emphasis on the desirability of inflation targeting policies. - The most up-to-date and accessible introduction to the New Keynesian framework available
- Uses a single benchmark model throughout
- Concise and easy to use
- Includes exercises
- An ideal resource for graduate students, researchers, and market analysts
| | | Product Details: | | | Author:
| Jordi Galí | | Hardcover:
| 224 pages | | Publisher:
| Princeton University Press | | Publication Date:
| February 11, 2008 | | Language:
| English | | ISBN:
| 0691133166 | | Product Width:
| 156.0 centimeters | | Product Height:
| 238.0 centimeters | | Product Weight:
| 1.04 pounds | | Package Length:
| 9.2 inches | | Package Width:
| 6.1 inches | | Package Height:
| 1.0 inches | | Package Weight:
| 1.05 pounds | | Average Customer Rating:
|  based on 9 reviews |
| | | | Customer Reviews: | |
Average Customer Review:
 ( 9 customer reviews )
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12 of 13 found the following review helpful:
 Not bad.Jun 10, 2010
By Heraclitus Junior
This is a good book as an introduction to the basics of New Keynsian DSGE models. Overall, it's a pretty good read, however it does have its flaws. The first one is that the book can be far too terse at times. Critical parts of the mathematical analysis are left out of the book. For example, you will not learn how to solve a DSGE model by reading this book. Nor will you learn how to estimate a DSGE model. You will not learn how to simulate a DSGE model by reading this book either. You will not learn how to check the stability of steady states. You will not learn how appropriate some of the quantitative methods used in this book, for example log-linearization, are. One could argue that the book was not written to teach any of these things anyway. The author's aim may have been to simply provide a brief, qualitative feel for how monetary policy models are constructed and what sort of insights they yield.
However, even by that goal, the book has some serious flaws. The author doesn't spend enough time in justifying some of the underlying assumptions that go into DSGE models, nor does he perform any sort of robustness check on these assumptions. For instance, after reading this book, I have no idea why Gali log-linearizes the first order conditions of his model before he proceeds to the solution. I know theorems like Hartman-Grobman allow linearization of the transition function in a neighbourhood of a hyperbolic steady state, but linearisation of the first-order conditions? Why is this legitimate? If so, HOW legitimate is it? Since we never actually get the solution to a real DSGE, we can't know how wrong the linearizations are. This issue is totally ignored by Gali. Likewise, what are the implications of the specific form of the utility function he picks for the agents(or should that be agent)? Why does the household have market power in setting its own wages? How robust is the numerical welfare analysis to a change in the underlying, arbitrarily chosen, welfare function? What are the implications of the outlandish assumption that there are an infinite number of identical countries each with measure zero? Why are we allowed to assume that the production function is linear in technology? Why do we use Calvo pricing over adjustment costs and what are the implications? Why do these models completely abstract away from capital and investment? Why is this legitimate and what are the implications? Surely a model studying interest rates should have meaningful investment/consumption decisions (in Gali's models, the representative consumer consumes all output in every period and there is never any savings, because capital is not required for production). These and many other pertinent issues are wholly ignored by Gali. He never indicates why many of the assumptions are made or what their potential consequences are.
Despite all these simplifications though, a lot of the analysis still ends up being numerical (rather than analytical), and I found this to be thoroughly disappointing. I can appreciate how such a heavily stylized model might tell you something qualitatively valuable, but I wouldn't put any weight on its quantitative predictions. As it turns out, the model's numerical predictions are basically all we get. After reading this book, I know vaguely *what* monetary theorists do, but I have no idea *why* they do it! Not only that, I wouldn't trust a DSGE model to tell me anything quantitatively relevant about the real economy.
On the plus side, Gali doesn't mince his words. The book is relatively short and it communicates its main ideas efficiently. This is in contrast to the excruciating exercise in verbosity put out by Michael Woodford.
2 of 2 found the following review helpful:
 Jordi Gali's bookMay 13, 2010
By Yuriy
This book is an indispensable introduction to modern New Keynesian macroeconomics. Exposition is very clear and accessible. Many students of macroeconomics will find this book very useful for understanding basics of sticky prices, business cycles and monetary policy in a simple but rigorous framework with optimizing households and firms. In a sense, this book helps to prepare for Woodford's "Interest and prices". Highly recommend for 1st year Ph.D. and advanced undergraduate students.
Great reference in DSGEFeb 24, 2012
By avidreader
Great book, with a thoughtful approach to DSGE models with money. It is not too dense, so in that sense it is an easier reading than Woodford's text. It certainly lacks the depth of Woodford's book but, still, it covers a lot in just about 7 chapters. If you know very little about DSGE models, or need to brush up whatever you learned eight years ago, I would recommend this great book. In particular, I think the chapter on optimal monetary policy within the NewKeynesian model is very clear.
1 of 2 found the following review helpful:
Gali's bookJul 06, 2009
By Pedro M. G. Alves
The book is a good piece of new-keynesian modeling writen by one of the main contributors for this area. It is very updated and it refers to the literature in a very accurate and interesting way. The material is quite mathematical and it can a bit hard to follow for people who had never had some calculus.
1 of 3 found the following review helpful:
great bookAug 25, 2011
By Martin Francos Rodrigue
Its a great book. i is explain very book the new keynesian model. I fave de woodford interest and prices and Gali it is better than woodford.
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