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

  • Reginaldo Pinto Nogueira


    (Fundação João Pinheiro, Brazil)

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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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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  1. 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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  7. Alex Luiz Ferreira & Miguel León-Ledesma, 2003. "Does the Real Interest Parity Hypothesis Hold? Evidence for Developed and Emerging Markets," Studies in Economics 0301, School of Economics, University of Kent.
  8. Rapach, David E. & Weber, Christian E., 2004. "Are real interest rates really nonstationary? New evidence from tests with good size and power," Journal of Macroeconomics, Elsevier, vol. 26(3), pages 409-430, September.
  9. Atkins, Frank J. & Coe, Patrick J., 2002. "An ARDL bounds test of the long-run Fisher effect in the United States and Canada," Journal of Macroeconomics, Elsevier, vol. 24(2), pages 255-266, June.
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  11. Reinhart, Carmen & Calvo, Guillermo, 2002. "Fear of floating," MPRA Paper 14000, University Library of Munich, Germany.
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