Revisiting the empirical evidence on firms' money demand
AbstractIn this paper we estimate the demand for liquidity by US non financial firms using data from COMPUSTAT database. In contrast to the previous literature, we consider firm-specific effects, such as cost-of-capital and wages. From the balanced and unbalanced panel estimations we infer that there are economies of scale in money demand by US business firms, because estimated sales elasticities are smaller than unity. In particular, they are lower than in previous empirical studies, suggesting that economies of scale in the demand for money are even bigger than formerly thought. In addition, it emerges that labor is not a substitute for money.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economics and Business.
Volume (Year): 59 (2007)
Issue (Month): 1 ()
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Web page: http://www.elsevier.com/locate/jeconbus
Other versions of this item:
- Francesca Lotti & Juri Marcucci, 2006. "Revisiting the empirical evidence on firmsÂ’ money demand," Temi di discussione (Economic working papers) 595, Bank of Italy, Economic Research and International Relations Area.
- E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
- L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
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