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Money and the Measurement of Total Factor Productivity

Author

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  • Diewert, Erwin
  • Fox, Kevin J.

Abstract

Firms have greatly increased their cash holdings since the mid-1990s. These holdings have an opportunity cost; i.e., allocating firm financial capital into monetary deposits means that investment in real assets is reduced. Traditional measures of Total Factor Productivity (TFP) do not take into account these holdings of monetary assets. Given the recent large increases in these holdings in the U.S. and other advanced economies, it is expected that adding these monetary assets to the list of traditional sources of capital services will reduce the TFP of the business sector. We measure this effect for the U.S. corporate and non-corporate business sectors.

Suggested Citation

  • Diewert, Erwin & Fox, Kevin J., 2019. "Money and the Measurement of Total Factor Productivity," Microeconomics.ca working papers erwin_diewert-2019-9, Vancouver School of Economics, revised 31 May 2019.
    • Handle: RePEc:ubc:pmicro:erwin_diewert-2019-9
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    File URL: https://econ2017.sites.olt.ubc.ca/files/2019/05/pdf_paper_Diewert-Fox_MoneyinProduction_DP19-07_May2019.pdf
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    Cited by:

    1. Diewert, Erwin & Fox, Kevin J., 2019. "Productivity Indexes and National Statistics: Theory, Methods and Challenges," Microeconomics.ca working papers erwin_diewert-2019-8, Vancouver School of Economics, revised 25 Apr 2019.
    2. Xiaolong Wang & Di Wang & Yanmin Zhao, 2024. "Managerial Time Orientation, Corporate Resource Allocation, and Firm Resilience," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(4), pages 19989-20018, December.

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    Keywords

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    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money

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