The paper examines the role of real cash balance in the production process in the Pakistani Manufacturing Industries. The issue has been empirically examined for four fines, belonging to tobacco, rayon, sugar and cement industries. Results do provide a justification for treating real cash holdings as a factor input. One of the key findings is the complimentary relationship between money and labor. This result has am important macro-policy implication. The result suggests that any contractionary monetary policy, aiming to control inflation, may not be successful. It may actually increase unemployment of labor force.
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