Are There Economies of Scale in the Demand for Money by Firms ? Some Panel Data Estimates

@inproceedings{Bover1999AreTE,
  title={Are There Economies of Scale in the Demand for Money by Firms ? Some Panel Data Estimates},
  author={Olympia Bover and Nadine Watson},
  year={1999}
}
We estimate elasticities of scale in the demand for money by firms using firm level panel data from Spain, the UK, and the US. This elasticity is one for Spain and the UK but smaller for the US. We find that the errors in the money demand equations contain two terms that are correlated with sales. Firstly, a permanent firm effect that captures differences in technological sophistication. Secondly, a measurement error in sales, which becomes relevant when relying on changes in sales to account… CONTINUE READING

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