NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Money in the Utility Function: An Empirical Implementation

James M. Poterba, Julio J. Rotemberg

NBER Working Paper No. 1796 (Also Reprint No. r1024)
Issued in 1986
NBER Program(s):   EFG   ME

This paper studies household asset demands by allowing certain assets to contribute directly to utility. It estimates the parameters of an aggregate utility function which includes both consumption and liquidity services.These liquidity services depend on the level of various asset stocks. We apply these estimates to investigate the long- and short-run interest elasticities of demand for money, time deposits, and Treasury bills. We also examine the impact of open market operations on interest rates, and present new estimates of the welfare cost of inflation.

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Document Object Identifier (DOI): 10.3386/w1796

Published:

  • Poterba, James M. and Julio J. Rotemberg."Money in the Utility Function: An Empirical Implementation," New Approaches to Monetary Economics, eds. W. Barnett and K. Singleton, Cambridge University Press, 1987. pp219-240
  • New Approaches to Monetary Economics, edited by William A. Barnett and Kenneth J. Singelton, pp. 219-240 New York: Cambridge University Press, 1987.

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