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Co-integrated money in the production function-evidence and implications

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  • Masoud Moghaddam

Abstract

The notion of money as a factor of production has been debated both theoretically and empirically by a number of researchers in the past four decades. However, the empirical support for money as an input along with labour and capital has been mixed and thus, the issue appears to be unsettled. Recent developments in econometrics regarding co-integration and error correction provide a rich environment in which the role of money in the production function can be reexamined. In a co-integrated space, this article presents empirical evidence indicating that different definitions of money (simple sum or the divisia M2) play an input role in the Cobb-Douglas production function.

Suggested Citation

  • Masoud Moghaddam, 2010. "Co-integrated money in the production function-evidence and implications," Applied Economics, Taylor & Francis Journals, vol. 42(8), pages 957-963.
  • Handle: RePEc:taf:applec:v:42:y:2010:i:8:p:957-963
    DOI: 10.1080/00036840701721075
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    References listed on IDEAS

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    1. Nourzad, Farrokh, 2002. "Real money balances and production efficiency: a panel-data stochastic production frontier study," Journal of Macroeconomics, Elsevier, vol. 24(1), pages 125-134, March.
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    3. Johnson, Harry G, 1969. "Inside Money, Outside Money, Income, Wealth, and Welfare in Monetary Theory," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 1(1), pages 30-45, February.
    4. Azali Mohamed, 1996. "Velocity and the variability of anticipated and unanticipated money growth in Malaysia," Applied Economics Letters, Taylor & Francis Journals, vol. 3(11), pages 697-700.
    5. 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 290-296, August.
    6. Oluwole Owoye, 1997. "Income velocity and the variability of money growth: evidence from less developed countries," Applied Economics, Taylor & Francis Journals, vol. 29(4), pages 485-496.
    7. Boyes, William J & Kavanaugh, David C, 1979. "Money and the Production Function: A Test for Specification Errors," The Review of Economics and Statistics, MIT Press, vol. 61(3), pages 442-446, August.
    8. Ben-Zion, Uri & Ruttan, Vernon W, 1975. "Money in the Production Function: An Interpretation of Empirical Results," The Review of Economics and Statistics, MIT Press, vol. 57(2), pages 246-247, May.
    9. Nguyen, Hong V, 1986. "Money in the Aggregate Production Function: Reexamination and Further Evidence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 18(2), pages 141-151, May.
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    Cited by:

    1. Jonathan Benchimol, 2011. "Money in the production function: a New Keynesian DSGE perspective," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00800539, HAL.
    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. repec:bla:pacecr:v:22:y:2017:i:3:p:350-382 is not listed on IDEAS
    4. Romina Bafile & Alessandro Piergallini, 2017. "Firms’ money demand and monetary policy," Pacific Economic Review, Wiley Blackwell, vol. 22(3), pages 350-382, August.
    5. Jonathan Benchimol, 2011. "Money in the Production Function : A New Keynesian DSGE Perspective," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00795547, HAL.

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