In price formation it has become customary to consider two main types of price stickiness: by Rotemberg (Rotemberg (1982)) and by Calvo (Calvo (1983)). The nonlinear DSGE models (with different types of stickiness) are estimated for 11 different countries (both developed and emerging markets)....

This article checks whether money is an omitted variable in the production process by proposing a microfounded New Keynesian Dynamic Stochastic General Equilibrium (DSGE) model. In this framework, real money balances enter the production function, and money demanded by households is...

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...

The form of bounded rationality characterizing the representative agent is key in the choice of the optimal monetary policy regime. While inflation targeting prevails for myopia that distorts agents' inflation expectations, price level targeting emerges as the optimal policy under myopia...