Article ID Journal Published Year Pages File Type
958017 Journal of Economics and Business 2007 23 Pages PDF
Abstract
In this paper we estimate the demand for liquidity by US non-financial firms using the 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.
Related Topics
Social Sciences and Humanities Business, Management and Accounting Strategy and Management
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