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Is monetary policy really neutral in the long-run? Evidence for some emerging and developed economies

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  • Reginaldo Pinto Nogueira

    ()
    (Fundação João Pinheiro, Brazil)

Abstract

The traditional economic theory suggests that changes in the money supply or in the interest rates can influence the business cycle, but not the long-run potential output. In other words, monetary policy is neutral over the long-run. In this paper we use some new developments in econometrics to test for the existence of a long-run relationship between the monetary policy instrument used by most Central Banks - short-term interest rates - and real output. Using annual data for 14 emerging and developed countries our results offer overall support for the traditional economic theory.

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File URL: http://www.accessecon.com/Pubs/EB/2009/Volume29/EB-09-V29-I3-P88.pdf
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Bibliographic Info

Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 29 (2009)
Issue (Month): 3 ()
Pages: 2432-2437

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Handle: RePEc:ebl:ecbull:eb-09-00358

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Related research

Keywords: Money neutrality; monetary policy; cointegration tests.;

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References

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  10. Moosa, Imad A., 1997. "Testing the long-run neutrality of money in a developing economy: the case of India," Journal of Development Economics, Elsevier, vol. 53(1), pages 139-155, June.
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  12. Starr, Martha A., 2005. "Does money matter in the CIS? Effects of monetary policy on output and prices," Journal of Comparative Economics, Elsevier, vol. 33(3), pages 441-461, September.
  13. Bae, Sang-Kun & Jensen, Mark J. & Murdock, Scott G., 2005. "Long-run neutrality in a fractionally integrated model," Journal of Macroeconomics, Elsevier, vol. 27(2), pages 257-274, June.
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Cited by:
  1. Asongu, Simplice A, 2013. "Does Money Matter in Africa? New Empirics on Long- and Short-run Effects of Monetary Policy on Output and Prices," MPRA Paper 48494, University Library of Munich, Germany.
  2. Asongu Simplice, 2011. "How would population growth affect investment in the future? Asymmetric panel causality evidence for Africa," Working Papers 11/002, African Governance and Development Institute..
  3. Simplice A, Asongu, 2011. "Long-term effects of population growth on aggregate investment dynamics: selected country evidence for Africa," MPRA Paper 30128, University Library of Munich, Germany.
  4. Asongu Simplice, 2013. "A note on the long-run neutrality of monetary policy: new empirics," Working Papers 13/032, African Governance and Development Institute..
  5. Asongu Simplice, 2013. "New Empirics of monetary policy dynamics: evidence from the CFA franc zones," Working Papers 13/016, African Governance and Development Institute..
  6. Asongu, Simplice A, 2012. "Correcting inflation with financial dynamic fundamentals: which adjustments matter in Africa?," MPRA Paper 46424, University Library of Munich, Germany, revised 14 Apr 2013.
  7. Asongu, Simplice A, 2013. "How would monetary policy matter in the proposed African monetary unions? Evidence from output and prices," MPRA Paper 48496, University Library of Munich, Germany.

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