DP726 A Simple Model of Money and Taxes and an Illustration with Brazilian Data
|Author(s):||Alberto Giovannini, Bart Turtelboom|
|Publication Date:||October 1992|
|Keyword(s):||Cash-in-advance Constraint, Inflation, Money Demand, Taxes|
|Programme Areas:||International Macroeconomics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=726|
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.