This paper explores how accounting consistency affects DSGE models. As many DSGE models descended from real business cycle models, I explore a simple labor-only RBC model and then a simple capital-and-labor RBC model with an exogenous external sector introduced. The conclusion reached in this...

This paper presents a re-interpretation of a New Keynesian model with capital, where zero long-run output gap restriction is eliminated and a certain type of assumption regarding risk-less nominal interest rate is adopted