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Money in the production function: a New Keynesian DSGE perspective

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.
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Contributor : Jonathan Benchimol Connect in order to contact the contributor
Submitted on : Wednesday, March 13, 2013 - 9:56:07 PM
Last modification on : Friday, April 29, 2022 - 10:12:36 AM
Long-term archiving on: : Monday, June 17, 2013 - 12:42:42 PM


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  • HAL Id : hal-00800539, version 1



Jonathan Benchimol. Money in the production function: a New Keynesian DSGE perspective. 2011. ⟨hal-00800539⟩



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