New-Keynesian Inflation Control is Equilibrium Selection

December 2025. This is a spinoff of the part of the original “Generalized Lucas Phillips Curve” paper that analyzed the standard new-Keynesian IS and Phillips curve. Both projects look for the most simple baseline model that captures standard views of how monetary policy works, that higher interest rates lower inflation going forward. This paper shows how the standard model does not work to that end: interest rates on their own raise inflation, and the entire force for disinflation is an equilibrium selection jump unrelated to higher interest rates. The standard Taylor rule hides that assumption but it’s there: There are many Taylor rule disturbances that produce the same interest rate, but different inflation. Read the paper> Matlab program>