New Keynesian economics emerged in the 1970s as a response to rational expectations challenges from Robert Lucas. It builds microeconomic foundations into models to explain why markets fail to clear instantly due to price stickiness.
John B Taylor formulated his eponymous rule in 1993 as a reduced form approximation of central bank responsiveness to inflation and output changes. The Taylor principle describes how nominal interest rates rise by more than one percentage point for each percent increase in inflation.
Gregory Mankiw expanded the concept through menu costs which represent lump-sum expenses incurred when altering price tags. These costs cause firms to avoid changing prices unless benefits exceed small thresholds creating significant disequilibrium across the market.
Greg Kaplan Benjamin Moll and Gianluca Violante coined the term HANK model in their 2018 paper describing households accumulating two distinct asset types. One asset remained liquid while another stayed illiquid creating rich heterogeneity in portfolio composition across different families.
The new neoclassical synthesis emerged in the 1990s combining dynamic aspects of Real Business Cycle Theory with imperfect competition features from New Keynesian frameworks. This merger formed the theoretical basis of mainstream macroeconomics today after resolving differences between schools regarding long-run neutrality.