Working Paper: CEPR ID: DP726
Authors: Alberto Giovannini; Bart Turtelboom
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: money demand; cash-in-advance constraint; taxes; inflation
JEL Codes: E41; H30
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| legal requirement to pay taxes in cash (H26) | money demand (E41) |
| money demand (E41) | consumption velocity (E41) |
| legal requirement to pay taxes in cash (H26) | consumption velocity (E41) |