Abstract
Chetty's direct utility approach was an innovative attempt to measure substitution relationships between money and near-monies. Moroney and Wilbratte, and more recently Boughton, have generalized the functional form used by Chetty to include income as an independent variable in a manner which subsumes Chetty's model as a special case. This paper modifies the. direct utility approach of these authors to alleviate estimation problems and provide a method of testing relative substitutabilities to obtain a ranking of assets. A three-equation model is estimated by Zellner's seemingly unrelated regressions procedure, with a linear constraint to eliminate identification problems. The Chi-square test developed by Zellner is used to choose a functional form and to compare relative substitutabilities. The stability of relationships over time is also tested.
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