In this survey we first briefly present the basic structure and results of the New Keynesian model. We then particularly focus on the implications for inflation dynamics. We will show how considering models with time-varying trend inflation overcomes the initial difficulties of the New Keynesian...

This paper analyzes the cost of disinflation under real wage rigidities in a micro-founded New Keynesian model. Unlike Blanchard and Galí (2007) who carried out a similar analysis in a linearized framework, we take non-linearities into account. We show that the results change dramatically, both...

This note shows that full price indexation is not optimal in the long-run in the New Keynesian model. Moreover, we show that more price stickiness may increase steady state welfare, if price indexation is partial.