A demanda por moeda em processos de inflação elevada

Abstract

This article proposes and tests an equation for the demand for real money balances in high inflation processes that extends and generalizes Cagan's celebrated model of hyperinflations. It is derived from a stochastic dynamic programming theoretical model of portfolio choice, and its solution suggests the adoption of an inverse relation between money balances and expected inflation. It also shows the need for the inclusion of the variance of the inflation rate as one of the explanatory variables, in addition to the real interest rate, and of a variable to capture the effects of the technical progress, and a seasonal factor. To complete the specification, expectations regarding the level and the variance of the inflation rate are assumed to be adaptive. To test the model, it was applied to the German hyperinflation and to the high inflation episode that occurred in Brazil in the last two decades, making use of the Box-Cox flexible functional form. One concludes for its general validity, and it is determined that Cagan's semi-logarithmic functional form is inappropriate to model the demand for real money balances in Brazil from 1974 to 1992. It is also shown that both the expected level and variance of the inflation rate are significant explanatory variables, and that the hypothesis that their coefficients are equal in absolute value, as predicted by theory, cannot be rejected.