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Money in the Production Function: a new Keynesian DSGE perspective

Jonathan Benchimol ()

No WP1304, ESSEC Working Papers from ESSEC Research Center, ESSEC Business School

Abstract: This paper proposes a New Keynesian Dynamic Stochastic General Equilibrium (DSGE) model where real money balances enter the production function. By using a Bayesian analysis, our model shows that money is not an omitted input to the production process and rejects the decreasing returns to scale hypothesis. Our simulations suggest that money plays a negligible role in the dynamics of output and inflation, despite its inclusion in the production function. In addition, we introduce the flexible-price real money balances concept.

Keywords: Money in the production function; DSGE; Bayesian estimation (search for similar items in EconPapers)
JEL-codes: E23 E31 E51 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac and nep-mon
Date: 2013-02
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Journal Article: Money in the production function: A new Keynesian DSGE perspective (2015) Downloads
Working Paper: Money in the production function: A new Keynesian DSGE perspective (2015)
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