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Testing long-run neutrality using intra-year data

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  • Kenneth Leong
  • Michael McAleer

Abstract

Previous tests of the long-run neutrality hypothesis have generally relied on annual time series data. This paper analyses the long-run neutrality of money in Australia using different sources of intra-year data, which permits an examination of the effects of seasonality and the robustness of previous empirical results. A reduced form ARIMA model is used with both quarterly seasonally unadjusted and adjusted Australian real GDP and nominal money supply to test the neutrality hypothesis. Using two measures of money stock, namely M1 and M3, it is shown that the hypothesis is supported using M1 as the measure of money supply, while it is rejected using M3. Recent trends and developments in the money and credit markets in Australia provide a possible explanation of the sensitivity of the outcome to the measure of money stock employed in the analysis.

Suggested Citation

  • Kenneth Leong & Michael McAleer, 2000. "Testing long-run neutrality using intra-year data," Applied Economics, Taylor & Francis Journals, vol. 32(1), pages 25-37.
    • Handle: RePEc:taf:applec:v:32:y:2000:i:1:p:25-37
    DOI: 10.1080/000368400322958
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    References listed on IDEAS

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    1. Franses, Philip Hans, 1996. "Periodicity and Stochastic Trends in Economic Time Series," OUP Catalogue, Oxford University Press, number 9780198774549.
    2. Robert G. King & Mark W. Watson, 1997. "Testing long-run neutrality," Economic Quarterly, Federal Reserve Bank of Richmond, issue Sum, pages 69-101.
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    Cited by:

    1. Habibullah, Muzafar & Hong, Puah & Mohamed, Azali, 2001. "Testing Long-Run Neutrality of Money in Malaysia," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 35, pages 69-83.
    2. Tang, Maggie May-Jean, 2016. "A Review of the Literature on Monetary Neutrality," MPRA Paper 70113, University Library of Munich, Germany.
    3. Kuek, Tai Hock, 2016. "A Review of Literature on Monetary Neutrality - The case of India," MPRA Paper 71962, University Library of Munich, Germany, revised 13 Jun 2016.
    4. Tang, Maggie May-Jean & Puah, Chin-Hong & Awang Marikan, Dayang-Affizzah, 2013. "Empirical Evidence on the Long-Run Neutrality Hypothesis Using Divisia Money," MPRA Paper 50020, University Library of Munich, Germany.
    5. Cai, Yifei, 2016. "货币供给数量、结构与经济增长—来自adl门限协整检验与时变格兰杰因果关系检验的证据 [Quantity and Structure of Money Supply and Economic Growth— Evidence from ADL Test for Threshold Cointegration and Time-varying Granger Causality Relation Test]," MPRA Paper 73750, University Library of Munich, Germany.
    6. Chin-Hong PUAH,* & Muzafar Shah HABIBULLAH** & Shazali Abu MANSOR*, 2002. "Some Empirical Evidence On The Quantity Theoretic Proposition Of Money In Asean-5," Pakistan Journal of Applied Economics, Applied Economics Research Centre, vol. 18, pages 31-47.
    7. Kartaev, Philipp (Картаев, Филипп) & Gerelishina, Alina (Герелишина, Алина), 2025. "Is There Long-Run Monetary Neutrality in Russia? [Долгосрочная Нейтральность Денег: Наблюдается Ли Она В России?]," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, issue 1, pages 6-29.
    8. Puah, Chin-Hong & Habibullah, Muzafar Shah & Lim, Kian-Ping, 2006. "Testing long-run neutrality of money: evidence from Malaysian stock market," MPRA Paper 37676, University Library of Munich, Germany.

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