Money and Productive Efficiency: Evidence from a High-Inflation Country

Abstract

This paper examines how money balances held by manufacturing firms affect their efficiency in generating sales revenue in a high-inflation economy. The analysis employs data from Turkish firms to estimate a stochastic frontier model, finding a strong positive association between the firms' money holdings and their efficiency. However, the role of money balances seems to diminish as firms hold higher raw material inventories.

Keywords:

• high inflation
• inventories
• manufacturing
• money demand by firms
• stochastic frontier estimation
• Turkey