This chapter aims to provide a hands-on approach to New Keynesian models and their uses for macroeconomic policy analysis. It starts by reviewing the origins of the New Keynesian approach, the key model ingredients and representative models. Building blocks of current-generation dynamic...

"This paper puts forward a method of policy simulation with an existing macroeconometric model under the maintained assumption that individuals form their expectations rationally. This new simulation technique grows out of Lucas' criticism that standard econometric policy evaluation permits...