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Money in the production function: A new Keynesian DSGE perspective

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  • Jonathan Benchimol

Abstract

This article checks whether money is an omitted variable in the production process by proposing a microfounded New Keynesian Dynamic Stochastic General Equilibrium model. In this framework, real money balances enter the production function, and money demanded by households is differentiated from that demanded by firms. Using a Bayesian analysis, our model weakens the hypothesis that money is a factor of production. However, the demand of money by firms appears to have a significant impact on the economy, even if this demand has a low weight in the production process.

Suggested Citation

  • Jonathan Benchimol, 2015. "Money in the production function: A new Keynesian DSGE perspective," Southern Economic Journal, John Wiley & Sons, vol. 82(1), pages 152-184, July.
    • Handle: RePEc:wly:soecon:v:82:y:2015:i:1:p:152-184
    DOI: 10.4284/0038-4038-2011.197
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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Is money a factor of production?
      by Economic Logician in Economic Logic on 2013-03-28 19:38:00

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    More about this item

    JEL classification:

    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers

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