HOW TO DERIVE KEYNESIAN RESULTS FROM 1ST PRINCIPLES - A SURVEY OF NEW-KEYNESIAN ECONOMICS

In the 1980s theoretical research in macroeconomics was dominated by w hat has become known as new-Keynesian economics. The principal aim of new-Keynesian economics is to explain how Keynesian results can be rec onciled with the neo-classical principles of utility and profit maximi zation. This paper provides a survey and an assessment of New Keynesia n economics. In our view, the theoretical foundation of new-Keynesian economics would be strengthened if more institutional detail is added to the analysis. The real challenge for new-Keynesian economics is to develop macrocconomics (and microeconomics) from a theory that takes t he working of markets seriously.