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Cointegrated money in production function: evidence from a developing country

Author

Listed:
  • Muhammad Nasir

    (Pakistan Institute of Development Economics, Islamabad, Pakistan)

  • Qasim Jan

    (University of Peshawar, Peshawar, Pakistan)

  • Muhammad Javid

    (Pakistan Institute of Development Economics, Islamabad, Pakistan)

Abstract

The notion that real money balances is a factor input has attracted considerable amount of attention from researchers and academicians. However, the debate is controversial and the consensus has yet to be developed. This issue becomes more important when a country follows contractionary monetary policy to curb inflation. The limited research for developing countries with sophisticated econometric techniques powered us to conduct this study. The underlying study employs cointegration approach to investigate the validity of money in production function of a developing country for the period 1964-2008. The cointegration results confirm money as an important factor input in the production function in the long run. The variance decomposition results surface money as greater contributor than labor and capital to output variability.

Suggested Citation

  • Muhammad Nasir & Qasim Jan & Muhammad Javid, 2011. "Cointegrated money in production function: evidence from a developing country," Economics Bulletin, AccessEcon, vol. 31(4), pages 2996-3005.
    • Handle: RePEc:ebl:ecbull:eb-11-00041
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    References listed on IDEAS

    as
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    5. Muhammad Nasir & Wasim Shahid Malik, 2011. "The Contemporaneous Correlation of Structural Shocks and Inflation-Output Variability in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 50(2), pages 145-162.
    6. Faiz ur, rehman & Wasim, shahid malik, 2010. "A structural VAR (SVAR) approach to cost channel of monetary policy," MPRA Paper 32349, University Library of Munich, Germany, revised 09 Feb 2011.
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    Cited by:

    1. Romina Bafile & Alessandro Piergallini, 2017. "Firms’ money demand and monetary policy," Pacific Economic Review, Wiley Blackwell, vol. 22(3), pages 350-382, August.

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    More about this item

    Keywords

    Money; Production Function; Cointegration;
    All these keywords.

    JEL classification:

    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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