Money in the Production Function: A New Keynesian DSGE Perspective

Citation:

Jonathan Benchimol. 2015. “Money in the Production Function: A New Keynesian DSGE Perspective.” Southern Economic Journal. [doi]
Paper719 KB

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.
Last updated on 01/17/2021