The Non-Neutrality of Commodity Money: From a classical production economy to corporate cash hoards

Money must be held before it can be spent. Drawing on two related projects, I examine what that implies for output and prices theoretically and empirically.

The first project develops a classical production economy. Specialized producers each make one good but consume many, money is itself a produced and durable commodity, and purchases must be paid for with money earned earlier. Because producers of goods wait to be paid, money can be non-neutral even though prices are fully flexible. I discuss these findings in relation to debates on whether monetary non-neutrality requires nominal rigidities, on what carries over from commodity to fiat money, and on the nonlinearity of the Phillips curve.

The second project uses Compustat data on US non-financial firms from 1987 to 2024, and documents how corporate cash holdings are distributed and how that distribution has changed over time. The results show that cash holdings are highly unequal: a skewed body lies beneath a heavy upper tail made up mostly of listed firms that do not yet have product revenue. I explore the rise in corporate cash since the mid-2000s and its relation to the distribution of cash and liquid assets to other assets. The dispersion of cash holdings widens in booms and narrows in downturns, a pattern driven by established firms rather than by changes in which firms are listed.

Speaker

• Jose Alejandro Coronado (University of Greenwich)

Header image credit: Mathieu Stern via Unsplash.