Real Money Balances and the Timing of Consumption: An Empirical Investigation

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Abstract
This paper examines the correlation between changes in consumer spending on nondurables and services, and levels or changes in a variety of other variables that might be expected to enter directly as arguments of the household utility function or to serve as measures of household liquidity. Empirical results strongly suggest that an increase in real money balances raises the marginal utility of consumption. Once the influence of real balances is accounted for, there is little evidence that other variables have a direct impact on the timing of consumption.

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