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Superneutrality in postwar economies

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  • James Bullard
  • John Keating

Abstract

A structural vector autoregression is employed to estimate the real output level response to permanent inflation shocks. We identify the model by assuming that in the long run, inflation is a monetary phenomenon. Well-known economic theory is used to establish this identification restriction. The model is estimated for a sample of 16 countries from the larger pool based on data quality, existence of long uninterrupted series on output and inflation, and evidence that the country experienced permanent shocks to inflation and output. The VAR is estimated for each country separately. We find some evidence of non-superneutrality, particularly for some low inflation countries, but in general our results suggest that superneutrality describes well most of the postwar economies we study.

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Bibliographic Info

Paper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 1994-011.

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Date of creation: 1994
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Publication status: Published in Journal of Monetary Economics, December 1995
Handle: RePEc:fip:fedlwp:1994-011

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Keywords: Regression analysis;

References

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  1. Geweke, John F, 1986. "The Superneutrality of Money in the United States: An Interpretation of the Evidence," Econometrica, Econometric Society, vol. 54(1), pages 1-21, January.
  2. Runkle, David E, 1987. "Vector Autoregressions and Reality: Reply," Journal of Business & Economic Statistics, American Statistical Association, vol. 5(4), pages 454, October.
  3. David E. Runkle, 1987. "Vector autoregressions and reality," Staff Report 107, Federal Reserve Bank of Minneapolis.
  4. Paul Gomme, 1991. "Money and growth revisited," Discussion Paper / Institute for Empirical Macroeconomics 55, Federal Reserve Bank of Minneapolis.
  5. Azariadis, Costas & Smith, Bruce D, 1996. " Private Information, Money, and Growth: Indeterminacy, Fluctuations, and the Mundell-Tobin Effect," Journal of Economic Growth, Springer, vol. 1(3), pages 309-32, September.
  6. Fisher, Mark E & Seater, John J, 1993. "Long-Run Neutrality and Superneutrality in an ARIMA Framework," American Economic Review, American Economic Association, vol. 83(3), pages 402-15, June.
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  8. Lippi, Marco & Reichlin, Lucrezia, 1993. "The Dynamic Effects of Aggregate Demand and Supply Disturbances: Comment," American Economic Review, American Economic Association, vol. 83(3), pages 644-52, June.
  9. De Gregorio, Jose, 1993. "Inflation, taxation, and long-run growth," Journal of Monetary Economics, Elsevier, vol. 31(3), pages 271-298, June.
  10. Gomme, P., 1993. "Money and Growth Revisited : Measuring the Costs of Inflation in an Endogenous Growth Model," Discussion Papers dp93-03, Department of Economics, Simon Fraser University.
  11. Orphanides, Athanasios & Solow, Robert M., 1990. "Money, inflation and growth," Handbook of Monetary Economics, in: B. M. Friedman & F. H. Hahn (ed.), Handbook of Monetary Economics, edition 1, volume 1, chapter 6, pages 223-261 Elsevier.
  12. John M. Roberts, 1990. "The sources of business cycles: a monetarist interpretation," Working Paper Series / Economic Activity Section 108, Board of Governors of the Federal Reserve System (U.S.).
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  17. Lucas, Robert E, Jr, 1980. "Two Illustrations of the Quantity Theory of Money," American Economic Review, American Economic Association, vol. 70(5), pages 1005-14, December.
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  19. James Bullard & Steve Russell, 1998. "Monetary steady states in a low real interest rate economy," Working Papers 1994-012, Federal Reserve Bank of St. Louis.
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Cited by:
  1. Huybens, Elisabeth & Smith, Bruce D., 1998. "Financial Market Frictions, Monetary Policy, and Capital Accumulation in a Small Open Economy," Journal of Economic Theory, Elsevier, vol. 81(2), pages 353-400, August.
  2. Serletis, Apostolos & Krause, David, 1996. "Empirical evidence on the long-run neutrality hypothesis using low-frequency international data," Economics Letters, Elsevier, vol. 50(3), pages 323-327, March.

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