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...

Uncertainty is a challenge for monetary policy. This paper introduces model uncertainty into a behavioral New Keynesian DSGE framework to derive robust optimal monetary policies. We consider two potential forms of agents’ heterogeneity, which refer to two mechanisms of expectation formation...