Is money an omitted variable in the production function? Some further results |
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Authors: | M Aynul Hasan Syed F Mahmud |
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Institution: | 1. Department of Economics, Acadia University, B0P 1X0, Wolfville, Nova Scotia, Canada 2. Department of Economics, Bilkent University, Ankara, Turkey
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Abstract: | In recent years, numerous studies have emphasized the role of real 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. |
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