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Muhammad Nasir, Qasim Jan and Muhammad Javid
''Cointegrated money in production function: evidence from a developing country''
( 2011, Vol. 31 No.4 )
The notion that real money balances is a factor input has attracted considerable amount of attention from researchers and academicians. However, the debate is controversial and the consensus has yet to be developed. This issue becomes more important when a country follows contractionary monetary policy to curb inflation. The limited research for developing countries with sophisticated econometric techniques powered us to conduct this study. The underlying study employs cointegration approach to investigate the validity of money in production function of a developing country for the period 1964-2008. The cointegration results confirm money as an important factor input in the production function in the long run. The variance decomposition results surface money as greater contributor than labor and capital to output variability.
Keywords: Money, Production Function, Cointegration
JEL: E4 - Money and Interest Rates: General
E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit: General
Manuscript Received : Jan 20 2011 Manuscript Accepted : Oct 21 2011

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