The science of macroeconomics has exhausted itself

New Keynesianism

New Keynesian Macroeconomics, New Keynesian Macroeconomics. 1. Term: Macroeconomic school that emerged in the 1980s, which, in contrast to the equilibrium-oriented economic explanation of the New Classical Macroeconomics, assumes that fluctuations in fundamental macroeconomic variables (income, employment) can only be explained if imperfections at the micro level (e.g. rigid wages and prices) exist .

2. New Keynesianism and Keynesianism: The New Keynesianism thus stands in the tradition of the Keynesian doctrine (Keynesianism). In contrast to this, the New Keynesianism provides a microeconomic foundation of wage and price rigidities. In traditional Keynesian approaches, wage rigidities are justified, for example, with the nominal wage illusion of employees. New Keynesianism tries to show why rigidity can also arise in the rational behavior of individuals. In principle, this is only possible if we move away from the picture of the perfect market and assume that companies can set their prices. For this reason, the typical market form on which the models of New Keynesianism are based is monopoly competition. The following are discussed as possible causes for price rigidity in microeconomic rational behavior: menu costs, staggered price setting, coordination failure and hysteresis (hysteresis).

3. The New Keynesianism has with other developments in Keynesian teaching little in common. Although both New Keynesianism and Post-Keynesianism assume price rigidity and monopoly market forms, the similarities are largely exhausted. While post-Keynesianism clearly distinguishes itself from the neoclassical paradigm through the importance it attaches to social conflict, insecurity and economic power, the New Keynesianism draws on neoclassical considerations in that it tries to provide a microeconomic justification of Keynesian macro hypotheses based on the maximization calculus . The traditional macroeconomic total model (macroeconomic total models of closed economies) is replaced in this way by a microfounded supply-demand model, which consists of a New Keynesian Phillips curve on the supply side and a dynamic IS equation on the demand side (New Keynesian macroeconomics, dynamic Basic model). Monetary policy is no longer replaced by money supply control, but rather by rule-based interest rate control, which is why a (micro-based) LM equation can be dispensed with. New Keynesian macroeconomics is therefore sometimes referred to in the literature as macroeconomics without an LM equation.

New Keynesianism differs from the Neo-Keynesian theory in that it does not focus on reciprocal rationing on the goods and labor market or exchange at "wrong" (not market-clearing) prices, but rather follows the neoclassical concept of equilibrium. He is also called New neoclassical synthesis because it combines neoclassical equilibrium approaches with nominal rigidity (price inertia) and the model world of monopolistic competition. In contrast to the traditional one Neoclassical Synthesis, which deals with traditional Keynesian total models of closed and open economies, the models of Neoclassical Synthesis are fully microfounded.

See the corresponding focus article on macroeconomics.