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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. Serletis, A & Moustas, Z, 1997. "International Evidence on the Neutrality of Money," Papers 9704, Calgary - Department of Economics.
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  12. Olekalns, N., 1995. "Some further Evidence on the Long Run Neutrality of Money," Department of Economics - Working Papers Series 465, The University of Melbourne.
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Cited by:
  1. Asongu Simplice, 2013. "Does Money Matter in Africa? New Empirics on Long- and Short-run Effects of Monetary Policy on Output and Prices," Working Papers 13/005, African Governance and Development Institute..
  2. Asongu Simplice, 2013. "Correcting inflation with financial dynamic fundamentals: which adjustments matter in Africa?," Working Papers 13/003, African Governance and Development Institute..
  3. Asongu, Simplice, 2013. "A note on the long-run neutrality of monetary policy: new empirics," MPRA Paper 56796, University Library of Munich, Germany.
  4. Simplice Asongu, 2013. "How Would Population Growth Affect Investment in the Future? Asymmetric Panel Causality Evidence for Africa," African Development Review, African Development Bank, vol. 25(1), pages 14-29.
  5. 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.
  6. Asongu Simplice, 2013. "How would monetary policy matter in the proposed African monetary unions? Evidence from output and prices," Working Papers 13/013, African Governance and Development Institute..
  7. Asongu Simplice, 2013. "New Empirics of monetary policy dynamics: evidence from the CFA franc zones," Working Papers 13/016, African Governance and Development Institute..

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