This work investigates the behavior of money demand in Brazil in order to derive the welfare costs of inflation after the Real Plan. The results, for a period of about seventeen years, corroborated the log-log specification that shows significant gains in welfare cost of inflation. Still, for an inflation of around 4.5% per year, there is a welfare cost between 0,15 and 0,20% of income. But, we suggest that the country directs its policies to achieve a much lower level of inflation and to a level of steady state real interest rate of developed countries.
Money Demand; Welfare Cost of Inflation; Monetary Policy
