Teaching Intermediate Macroeconomics using （中级宏观经济学教学使用）.pdfVIP

Teaching Intermediate Macroeconomics using the 3-Equation Model Wendy Carlin and David Soskice Much teaching of intermediate macroeconomics uses the IS-LM-AS or AD- AS approach. This is far removed both from the practice of interest rate setting, inflation-targeting central banks and from the models that are taught in graduate courses. Modern monetary macroeconomics is based on what is increasingly known as the 3-equation New Keynesian model: IS curve, Phillips curve and interest rate- based monetary policy rule (IS-PC-MR). This is the basic analytical structure of Michael Woodford’s book Interest and Prices published in 2003 and, for example, of the widely cited paper “The New Keynesian Science of Monetary Policy” by Clarida et al. published in the Journal of Economic Literature in 1999. A recent graduate textbook treatment is Gali (2008). Much of this literature is inaccessible to undergraduates and non-specialists. Our aim is to show how this divide can be bridged in a way that retains the tractability and policy-friendliness of the old ap- proach yet fits the institutional realities of contemporary policy-making and opens the way to the more advanced literature. Our contribution is to develop a version of the 3-equation model that can be taught to undergraduate students and can be deployed to analyze a broad range of policy issues, including the recent credit/banking crisis and the oil and commodities price shock.1 It can be taught using diagrams and minimal algebra. The IS diagram is placed vertically above the Phillips diagram, with the monetary rule shown in the latter along with the Phillips curves. We believe that our IS-PC-MR graphical analysis is particularly useful for explaining the optimizing behaviour of the central bank. Users can see and remember readily where the key relationships come from and are therefore able to vary the