An Update on Money in the Production Function
AbstractUsing the Cobb-Douglas production function, this study tests whether money is a significant determinant of output. Three log-linear specifications are applied to U.S. annual data from 1959-85. Real output is expressed as a function of labor, capital, and real money balances. M1, M2, and M3 are tested in each of the three specifications. All three definitions of money are significant positive determinants of output in the unrestricted Cobb-Douglas. However, when the sum of the elasticities is restricted to one, the money coefficients become negative. This inconsistency needs to be further examined.
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Bibliographic InfoArticle provided by Eastern Economic Association in its journal Eastern Economic Journal.
Volume (Year): 15 (1989)
Issue (Month): 3 (Jul-Sep)
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- Short, Eugenie Dudding, 1979. "A New Look at Real Money Balances as a Variable in the Production Function," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 11(3), pages 326-39, August.
- Sinai, Allen & Stokes, Houston H, 1972. "Real Money Balances: An Omitted Variable from the Production Functions?," The Review of Economics and Statistics, MIT Press, vol. 54(3), pages 290-96, August.
- Subrahmanyam, Ganti, 1980. "Real Money Balances as a Factor of Production: Some New Evidence," The Review of Economics and Statistics, MIT Press, vol. 62(2), pages 280-83, May.
- Simos, Evangelos O., 1981. "Real money balances as a productive input : Further evidence," Journal of Monetary Economics, Elsevier, vol. 7(2), pages 207-225.
- Benchimol , Jonathan, 2013.
"Money in the Production Function: a new Keynesian DSGE perspective,"
ESSEC Working Papers
WP1304, ESSEC Research Center, ESSEC Business School.
- Jonathan Benchimol, 2011. "Money in the production function: a New Keynesian DSGE perspective," UniversitÃ© Paris1 PanthÃ©on-Sorbonne (Post-Print and Working Papers) hal-00800539, HAL.
- Jonathan Benchimol, 2013. "Money in the Production Function : A New Keynesian DSGE Perspective," UniversitÃ© Paris1 PanthÃ©on-Sorbonne (Post-Print and Working Papers) hal-00795547, HAL.
- Shyam J. Kamath & K. C. Jensen & R. E. Bennett, 1989. "Reprise and Clarification [Money in the Production Function--An Alternative Test Procedure," Eastern Economic Journal, Eastern Economic Association, vol. 15(3), pages 241-243, Jul-Sep.
- S. J. Kamath & K. C. Jensen & R. E. Bennett, 1991. "A Counter-Counter Critique: A Reply," Eastern Economic Journal, Eastern Economic Association, vol. 17(4), pages 535-541, Oct-Dec.
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