This study eliminates the effects of markup, returns to scale, and capital utilization from the Solow residual (SR) for Korea to derive an alternative measure for productivity. Empirical results show that markup generates significant bias in the SR, and that the alternative productivity measure is greater than the residual. Furthermore, money supply Granger‐causes the SR but does not Granger‐cause the alternative measure, suggesting that the new productivity measure is consistent with the neutrality of money. The results contradict the presumption that the SR with variable capital utilization represents true technology shocks because it is orthogonal to demand shocks.(JEL C32, E32, O47)