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Long run effects of money on real consumption and investment in the U.S

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Author Info
Shelley, Gary
Wallace, Frederick

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Abstract

This paper tests for long run neutrality (LRN) of money with respect to real expenditures in the U.S. over the 1947-2004 period. Real consumption and investment expenditures, as well as their broadly defined components, are examined. We also test for the effects of money on long run reallocations of GDP among durables, nondurables, and services. The time series characteristics of each variable are rigorously investigated. This is followed by application of the LRN test, introduced by Fisher and Seater (1993), to each real expenditures series. Although rejections of LRN occur in a number of studies, our results support long run neutrality of money with respect to real expenditures regardless of the level of data aggregation.

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File URL: http://mpra.ub.uni-muenchen.de/4136/
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Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 4136.

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Date of creation: Mar 2006
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Publication status: Published in International Journal of Applied Economics 3.1(2006): pp. 71-88
Handle: RePEc:pra:mprapa:4136

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Related research
Keywords: Money neutrality; consumption; investment;

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Find related papers by JEL classification:
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
E20 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)

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    Other versions:
  2. Olekalns, Nilss, 1996. "Some further evidence on the long-run neutrality of money," Economics Letters, Elsevier, vol. 50(3), pages 393-398, March. [Downloadable!] (restricted)
    Other versions:
  3. Gary L. Shelley & Frederick H. Wallace, 2004. "Testing for Long Run Neutrality of Money in Mexico," Macroeconomics 0402003, EconWPA. [Downloadable!]
  4. Boschen, John F & Otrok, Christopher M, 1994. "Long-Run Neutrality and Superneutrality in an ARIMA Framework: Comment," American Economic Review, American Economic Association, vol. 84(5), pages 1470-73, December. [Downloadable!] (restricted)
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  6. Christina D. Romer & David H. Romer, 1990. "New Evidence on the Monetary Transmission Mechanism," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 21(1990-1), pages 149-214. [Downloadable!]
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  9. Elliott, Graham & Rothenberg, Thomas J & Stock, James H, 1996. "Efficient Tests for an Autoregressive Unit Root," Econometrica, Econometric Society, vol. 64(4), pages 813-36, July. [Downloadable!] (restricted)
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  10. Gerald Carlino & Robert Defina, 1998. "The Differential Regional Effects Of Monetary Policy," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 572-587, November. [Downloadable!] (restricted)
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  12. Patrick J. Coe & James M. Nason, 2004. "Long-run monetary neutrality and long-horizon regressions," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(3), pages 355-373. [Downloadable!]
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  15. James Bullard, 1999. "Testing long-run monetary neutrality propositions: lessons from the recent research," Review, Federal Reserve Bank of St. Louis, issue Nov, pages 57-77. [Downloadable!]
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  18. Dale, Spencer & Haldane, Andrew G., 1995. "Interest rates and the channels of monetary transmission: Some sectoral estimates," European Economic Review, Elsevier, vol. 39(9), pages 1611-1626, December. [Downloadable!] (restricted)
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