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Empirical Evidence on the Long-Run Neutrality Hypothesis Using Divisia Money

  • Tang, Maggie May-Jean
  • Puah, Chin-Hong
  • Awang Marikan, Dayang-Affizzah

By employing Fisher and Seater’s (1993) long-run neutrality test, the researchers tested the monetary neutrality proposition in Singapore for the period of 1980-2009. Empirical findings show that monetary neutrality does not hold in Singapore when both the simple-sum money and Divisia money are employed. As both the simple-sum and Divisia monetary aggregates are non-neutral, monetary authorities may consider their use as a monetary policy tool affecting real economic activity.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 50020.

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Date of creation: 2013
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Handle: RePEc:pra:mprapa:50020
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  1. Puah, Chin-Hong & Habibullah, M.S. & Abu Mansor, Shazali, 2008. "On the Long-Run Monetary Neutrality: Evidence from the SEACEN Countries," MPRA Paper 31762, University Library of Munich, Germany.
  2. Olekalns, N., 1995. "Some further Evidence on the Long Run Neutrality of Money," Department of Economics - Working Papers Series 465, The University of Melbourne.
  3. Aksoy, Yunus & Piskorski, Tomasz, 2006. "U.S. domestic money, inflation and output," Journal of Monetary Economics, Elsevier, vol. 53(2), pages 183-197, March.
  4. Barnett, William A., 1978. "The user cost of money," Economics Letters, Elsevier, vol. 1(2), pages 145-149.
  5. Chin-Hong, Puah & Lee-Chea, Hiew, 2010. "Financial Liberalization, Weighted Monetary Aggregates and Money Demand in Indonesia," MPRA Paper 31731, University Library of Munich, Germany.
  6. Leigh Drake & Terence C. Mills, 2005. "A New Empirically Weighted Monetary Aggregate for the United States," Economic Inquiry, Western Economic Association International, vol. 43(1), pages 138-157, January.
  7. Serletis, Apostolos & Koustas, Zisimos, 1998. "International Evidence on the Neutrality of Money," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 30(1), pages 1-25, February.
  8. Kenneth Leong & Michael McAleer, 2000. "Testing long-run neutrality using intra-year data," Applied Economics, Taylor & Francis Journals, vol. 32(1), pages 25-37.
  9. Dahalan, Jauhari & Sharma, Subhash C. & Sylwester, Kevin, 2005. "Divisia monetary aggregates and money demand for Malaysia," Journal of Asian Economics, Elsevier, vol. 15(6), pages 1137-1153, January.
  10. Serletis, Apostolos & Krause, David, 1996. "Empirical evidence on the long-run neutrality hypothesis using low-frequency international data," Economics Letters, Elsevier, vol. 50(3), pages 323-327, March.
  11. Tan Hui Boon & Baharumshah Ahmad Zubaidi, 1999. "Dynamic Causal Chain of Money, Output, Interest Rate and Prices in Malaysia: Evidence Based On Vector Error- Correction Modelling Analysis," International Economic Journal, Taylor & Francis Journals, vol. 13(1), pages 103-120.
  12. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
  13. Chin-Hong, Puah & Muzafar Shah, Habibullah & Venus Khim-Sen, Liew, 2009. "Is Money Neutral In Stock Market? The Case of Malaysia," MPRA Paper 24017, University Library of Munich, Germany, revised 2010.
  14. H. Sonmez Atesoglu & Jamie Emerson, 2009. "Long-run monetary neutrality," Applied Economics, Taylor & Francis Journals, vol. 41(16), pages 2025-2036.
  15. Schwert, G. William, 1987. "Effects of model specification on tests for unit roots in macroeconomic data," Journal of Monetary Economics, Elsevier, vol. 20(1), pages 73-103, July.
  16. Shyh-Wei Chen, 2007. "Evidence of the Long-Run Neutrality of Money: The Case of South Korea and Taiwan," Economics Bulletin, AccessEcon, vol. 3(64), pages 1-18.
  17. repec:ebl:ecbull:v:3:y:2007:i:64:p:1-18 is not listed on IDEAS
  18. Puah, Chin-Hong & Habibullah, Muzafar Shah & Lau, Evan & Abu Mansor, Shazali, 2006. "Testing long-run monetary neutrality in Malaysia: Revisiting divisia money," MPRA Paper 31750, University Library of Munich, Germany.
  19. Bae, Sang-Kun & Jensen, Mark J. & Murdock, Scott G., 2005. "Long-run neutrality in a fractionally integrated model," Journal of Macroeconomics, Elsevier, vol. 27(2), pages 257-274, June.
  20. Michael T. Belongia, 1992. "Selecting an intermediate target variable for monetary policy when the goal is price stability," Working Papers 1992-008, Federal Reserve Bank of St. Louis.
  21. Darrat, Ali F. & Chopin, Marc C. & Lobo, Bento J., 2005. "Money and macroeconomic performance: revisiting divisia money," Review of Financial Economics, Elsevier, vol. 14(2), pages 93-101.
  22. Puah, Chin-Hong & Habibullah, Muzafar Shah & Abu Mansor, Shazali, 2008. "Some Empirical Evidence on the Quantity Theoretic Proposition of Money in ASEAN-5," MPRA Paper 31768, University Library of Munich, Germany.
  23. Fisher, Mark E & Seater, John J, 1993. "Long-Run Neutrality and Superneutrality in an ARIMA Framework," American Economic Review, American Economic Association, vol. 83(3), pages 402-15, June.
  24. Muzafar Shah Habibullah, 1998. "Divisia money and income in Indonesia: some results from error-correction models, 1981:1-1994:4," Applied Economics Letters, Taylor & Francis Journals, vol. 5(6), pages 387-391.
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