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Integrability and the demand for monetary assets: an alternative approach to an old problem

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  • Cysne, Rubens Penha

Abstract

This note provides necessary and su¢cient conditions for some speci…c multidimensional consumer’s surplus welfare measures to be well posed (path independent). We motivate the problem by investigating partial-equilibrium measures of the welfare costs of in‡ation. The results can also be used for checking path independence of alternative de…nitions of Divisia indexes of monetary services. Consumer theory classically approaches the integrability problem by considering compensated demands, homothetic preferences or quasi-linear utility functions. Here, instead, we consider demands of monetary assets generated from a shopping-time perspective. Paralleling the above mentioned procedure, of …nding special classes of utility functions that satisfy the integrability conditions, we try to infer what particular properties of the transacting technology could assure path independence of multidimensional welfare measures. We show that the integrability conditions are satis…ed if and only if the transacting technology is blockwise weakly separable. We use two examples to clarify the point.

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  • Cysne, Rubens Penha, 2000. "Integrability and the demand for monetary assets: an alternative approach to an old problem," FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) 398, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil).
    • Handle: RePEc:fgv:epgewp:398
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    References listed on IDEAS

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    1. James R. Hines, 1999. "Three Sides of Harberger Triangles," Journal of Economic Perspectives, American Economic Association, vol. 13(2), pages 167-188, Spring.
    2. Samuelson, Paul A & Sato, Ryuzo, 1984. "Unattainability of Integrability and Definiteness Conditions in the General Case of Demand for Money and Goods," American Economic Review, American Economic Association, vol. 74(4), pages 588-604, September.
    3. Marty, Alvin L & Chaloupka, Frank J, 1988. "Optimal Inflation Rates: A Generalization," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 20(1), pages 141-144, February.
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    Cited by:

    1. Cysne, Rubens Penha, 2000. "Divisia indexes, money and welfare," FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) 396, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil).

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