Money in the production function

Money in the production function: a new Keynesian DSGE perspective

JEL codes: 
E23, E31, E52
Version Date: 
Dec 2011

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.

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