For the past fifteen years the New Keynesian model has served as a frame of reference for analyses of fluctuations and stabilization That framework has allowed the rigor and internal consistency of dynamic general equilibrium models to be combined with typically Keynesian assumptions, like monopolistic competition and nominal rigidities, thus setting the stage for a meaningful, welfarebased analysis of the effects of alternative monetary policy rules. Indeed many central banks and policy institutions have adopted medium-scale versions of that model for simulation and forecasting purposes.
