Recent empirical evidence suggest that real money balances can be treated as a productive input in
production. The reason for incorporating real money balances as a factor of production is because real
money balances as a medium of exchange facilitate adjustments between capital and labour for specialization
purposes and thus increase productivity. This study is an attempt to empirically test the evidence
that real money balances is an input in the production function of the Malaysian agricultural
sector. The results suggest that real money balances play significant role as a productive input in the
production function of the Malaysian agricultural sector
