New Keynesian Microfoundations Revisited: A Calvo-Taylor-Rule-of-Thumb Model and Optimal Monetary Policy Delegation

We analyze the microfoundations of the Phillips curve and the close links between that relationship\nand results concerning optimal monetary policy, stabilisation bias and monetary policy delegation.\nMost recent literature has used a New Keynesian Phillips Curve based on Calvo pricing, often with\nan additional lagged inflation term motivated by rule-of-thumb behaviour. We develop a framework\nwhich encompasses this workhorse model while allowing for a richer time dependent pricing rule.\nThis permits a more general analysis while showing that the standard model and policy conclusions\nderived from it are not robust to relatively minor changes in its microfoundations.