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Real Balances in the Utility Function: Evidence for Brazil

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  • Leonardo Soriano de Alencar
  • Márcio I. Nakane

Abstract

The aim of this paper is to examine the relevance of a money-in-the-utility-function model for the Brazilian economy. In addition to consumption, the household is supposed to derive utility from leisure and from the holdings of real balances. The system, formed by the first-order conditions of the household intertemporal problem (Euler equations), is estimated by generalized method of moments (GMM). The results show strong support for the presence of money in the utility function for Brazil.

Suggested Citation

  • Leonardo Soriano de Alencar & Márcio I. Nakane, 2003. "Real Balances in the Utility Function: Evidence for Brazil," Working Papers Series 68, Central Bank of Brazil, Research Department.
  • Handle: RePEc:bcb:wpaper:68
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    File URL: https://www.bcb.gov.br/pec/wps/ingl/wps68.pdf
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    References listed on IDEAS

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    22. Benjamin Miranda Tabak & Solange Maria Guerra, 2002. "Stock Returns and Volatility," Working Papers Series 54, Central Bank of Brazil, Research Department.
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