A Simple Model of Money and Taxes and an Illustration with Brazilian Data

Alberto Giovannini and Bart Turtelboom

No 726, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We explore the properties of velocity in a model where agents are required by law to use money to pay taxes, but not for any other private purchases. The model is applied to Brazil between 1975 and 1990. We show that the model mimics consumption velocity very closely during the high-inflation years.

Keywords: Cash-in-advance Constraint; Inflation; Money Demand; Taxes (search for similar items in EconPapers)
JEL-codes: E41 H30 (search for similar items in EconPapers)
Date: 1992-10
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