Corporate Liquidity Demand in the Us: Evidence from Panel Data

Ente Einaudi Working Paper No. 2003-T30

29 Pages Posted: 29 Apr 2004

Date Written: October 2003

Abstract

In this paper we estimate the demand for liquidity by US business firms using 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 papers, suggesting that economies of scales in the demand for money are even bigger than formerly thought. In addition, it emerges that labor is not a substitute for money.

Keywords: Panel Data, Liquidity, Demand for Money, COMPUSTAT

JEL Classification: E41, L60, C23

Suggested Citation

Lotti, Francesca and Marcucci, Juri, Corporate Liquidity Demand in the Us: Evidence from Panel Data (October 2003). Ente Einaudi Working Paper No. 2003-T30, Available at SSRN: https://ssrn.com/abstract=531042 or http://dx.doi.org/10.2139/ssrn.531042

Francesca Lotti (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
00184 Roma
Italy

Juri Marcucci

Bank of Italy ( email )

Via Nazionale , 91
Rome, 00184
Italy
+39-06-4792-4069 (Phone)

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