Essays on monetary and financial factors in real economic activity

This dissertation contains three chapters. The first chapter focuses on estimating the firm's demand for money. The second and the third chapters cover the area of financial sector development and economic growth.; The first chapter derives the firm demand for money equation based on the cash in advance model. The theoretical framework indicates that the firm's cash management decision depends positively on the wage and investment bills, and negatively on the fraction of investment goods purchased with credit, and the nominal interest rate. The empirical investigation uses firm-level data from COMPUSTAT to estimate the log linear approximation of the demand for money equation and finds results that are consistent with the theoretical predictions.; The second chapter applies time series analysis technique to investigate the channel through which financial sector development promotes growth for ten countries in South and East Asia. The multivariate vector autoregressive framework is utilized to examine the magnitude and direction of links between financial intermediaries and economic performance for these countries. The empirical results provided by Granger causality test, and vector error correction model are consistent with a factor accumulation channel as the primary mechanism through which the financial sector influenced macroeconomic outcomes in these countries.; The third chapter employs the cross-section and panel data of 84 countries to investigate the robustness of the finance-growth relationship and to examine whether the cross-country growth regression is misspecified. Similar to the finding of King and Levine (1993), our empirical evidence shows that the links are quite robust to alterations in the conditioning set. However, they are not robust to changes in econometric specification. Finally, we find that a single cross sectional growth regression is misspecified and that the growth behavior is consistent with a multiple-steady state growth model.