Revisiting the empirical evidence on firmsÂ’ 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 InfoPaper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 595.
Date of creation: May 2006
Date of revision:
Panel Data; Liquidity; Demand for Money; COMPUSTAT;
Other versions of this item:
- Lotti, Francesca & Marcucci, Juri, 2007. "Revisiting the empirical evidence on firms' money demand," Journal of Economics and Business, Elsevier, vol. 59(1), pages 51-73.
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-07-09 (All new papers)
- NEP-CBA-2006-07-09 (Central Banking)
- NEP-MAC-2006-07-09 (Macroeconomics)
- NEP-MON-2006-07-09 (Monetary Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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