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Is Money an Omitted Variable in the Production Function? Some Further Results

Author

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  • Hasan, M Aynul
  • Mahmud, Syed F

Abstract

In recent years, numerous studies have emphasized the role of balances in the production function in terms of money being useful: as an intermediate good; as liquid reserves for investment; and also serving as a link between aggregate supply and the nominal interest rate. In this paper we report new Canadian empirical evidence regarding the important role of money in the production process of aggregate manufacturing industries based on a flexible translog cost function approach. In general, our results support the hypothesis that money is an important factor in the production function and that there are potential supply side effects of a change in the interest rate.

Suggested Citation

  • Hasan, M Aynul & Mahmud, Syed F, 1993. "Is Money an Omitted Variable in the Production Function? Some Further Results," Empirical Economics, Springer, vol. 18(3), pages 431-445.
  • Handle: RePEc:spr:empeco:v:18:y:1993:i:3:p:431-45
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    References listed on IDEAS

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    1. Heinesen, Eskil, 1995. "The two-variable CES transaction function in macroeconomic rationing models," Economics Letters, Elsevier, vol. 48(3-4), pages 257-265, June.
    2. Carlstrom, Charles T & Fuerst, Timothy S, 1997. "Agency Costs, Net Worth, and Business Fluctuations: A Computable General Equilibrium Analysis," American Economic Review, American Economic Association, pages 893-910.
    3. Fagnart, Jean-Francois & Licandro, Omar & Sneessens, Henri R., 1997. "Capacity utilization and market power," Journal of Economic Dynamics and Control, Elsevier, vol. 22(1), pages 123-140, November.
    4. Eskil Heinesen, 1992. "CES Transaction Functions in Macroeconomic Rationing Models," Discussion Papers 92-07, University of Copenhagen. Department of Economics.
    5. Kahn, James A, 1987. "Inventories and the Volatility of Production," American Economic Review, American Economic Association, vol. 77(4), pages 667-679, September.
    6. Barro, Robert J & Grossman, Herschel I, 1971. "A General Disequilibrium Model of Income and Employment," American Economic Review, American Economic Association, vol. 61(1), pages 82-93, March.
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    Cited by:

    1. Shaw, Ming-Fu & Lai, Ching-Chong & Chang, Wen-Ya, 2005. "Anticipated policy and endogenous growth in a small open monetary economy," Journal of International Money and Finance, Elsevier, vol. 24(5), pages 719-743, September.
    2. Jonathan Benchimol, 2015. "Money in the production function: A new Keynesian DSGE perspective," Southern Economic Journal, Southern Economic Association, vol. 82(1), pages 152-184, July.
    3. Nicholas Apergis, 2010. "Old Wine in a New Bottle: Are Financial Variables Omitted Variables in the Production Function?," Research in World Economy, Research in World Economy, Sciedu Press, vol. 1(1), pages 2-9, November.
    4. Erdem BaÅçi & Syed F. Mahmud & Eray M. Yucel, 2007. "Money and Productive Efficiency: Evidence from a High-Inflation Country," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 43(1), pages 64-73, February.
    5. Stodder, James, 2009. "Complementary credit networks and macroeconomic stability: Switzerland's Wirtschaftsring," Journal of Economic Behavior & Organization, Elsevier, vol. 72(1), pages 79-95, October.
    6. repec:bla:pacecr:v:22:y:2017:i:3:p:350-382 is not listed on IDEAS
    7. repec:eee:quaeco:v:65:y:2017:i:c:p:16-24 is not listed on IDEAS
    8. Romina Bafile & Alessandro Piergallini, 2017. "Firms’ money demand and monetary policy," Pacific Economic Review, Wiley Blackwell, vol. 22(3), pages 350-382, August.
    9. Jonathan Benchimol, 2015. "Money in the production function: A new Keynesian DSGE perspective," Southern Economic Journal, Southern Economic Association, vol. 82(1), pages 152-184, July.

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