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


  • Shelley, Gary
  • Wallace, Frederick


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.

Suggested Citation

  • Shelley, Gary & Wallace, Frederick, 2006. "Long run effects of money on real consumption and investment in the U.S," MPRA Paper 4136, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:4136

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    References listed on IDEAS

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    13. 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.
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    More about this item


    Money neutrality; consumption; investment;

    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 - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)

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    1. Talk:Neutrality of money in Wikipedia English ne '')


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