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A note on the long-run neutrality of monetary policy: new empirics

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  • Asongu, Simplice A.

    (African Governance and Development Institute, P.O. Box 18 SOA/ 1365 Yaoundé, Cameroon.)

Abstract

Economic theory traditionally suggests that monetary policy can influence the business cycle, but not the long-run potential output. Despite well documented theoretical and empirical consensus on money neutrality in the literature, the role of money as an informational variable for monetary policy decision has remained opened to debate with empirical works providing mixed outcomes. This paper addresses two substantial challenges to this debate: the neglect of developing countries in the literature and the use of new financial dynamic fundamentals that broadly reflect monetary policy. The empirics are based on annual data from 34 African countries for the period 1980 to 2010. Using a battery of tests for integration and long-run equilibrium properties, results offer overall support for the traditional economic theory.

Suggested Citation

  • Asongu, Simplice A., 2014. "A note on the long-run neutrality of monetary policy: new empirics," European Economic Letters, European Economics Letters Group, vol. 3(1), pages 1-6.
  • Handle: RePEc:ris:eueclt:0019
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    3. Nyorekwa, Enock Twinoburyo & Odhiambo, Nicholas Mbaya, 2016. "Monetary policy and economic growth in Kenya:The role of money supply and interest rates," Working Papers 20712, University of South Africa, Department of Economics.

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    More about this item

    Keywords

    Monetary policy; Credit; Empirics; Africa;
    All these keywords.

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E59 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Other
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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