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Money in the production function: A new Keynesian DSGE perspective

Listed author(s):
  • Jonathan Benchimol

    ()

    (BoI - Bank of Israel)

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.

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Paper provided by HAL in its series Post-Print with number hal-01182696.

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Date of creation: 30 Jul 2015
Publication status: Published in Southern Economic Journal, Southern Economic Association, 2015, 82 (1), pp.33. . <10.4284/0038-4038-2011.197>
Handle: RePEc:hal:journl:hal-01182696
DOI: 10.4284/0038-4038-2011.197
Note: View the original document on HAL open archive server: https://hal-paris1.archives-ouvertes.fr/hal-01182696
Contact details of provider: Web page: https://hal.archives-ouvertes.fr/

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  24. Adolfson, Malin & Laséen, Stefan & Lindé, Jesper & Villani, Mattias, 2005. "Bayesian Estimation of an Open Economy DSGE Model with Incomplete Pass-Through," Working Paper Series 179, Sveriges Riksbank (Central Bank of Sweden).
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  29. Allen Sinai & Houston H. Stokes, 1991. "Real Money Balances in the Production Function: A Comment," Eastern Economic Journal, Eastern Economic Association, vol. 17(4), pages 533-535, Oct-Dec.
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