International Evidence on Stochastic and Deterministic Monetary Neutrality

Antonio Noriega (), Soria Luis M. and Velázquez Ramón

No 2008-04, Working Papers from Banco de México

Abstract: We analyze the issue of the impact of multiple breaks on monetary neutrality results, using a long annual international data set. We empirically verify whether neutrality propositions remain addressable (and if so, whether they hold or not), when unit root tests are carried out allowing for multiple structural breaks in the long-run trend function of the variables. It is found that conclusions on neutrality are sensitive to the number and location of breaks. In order to interpret the evidence for structural breaks, we introduce a notion of deterministic monetary neutrality, which naturally arises in the absence of permanent stochastic shocks to the variables.

JEL-codes: C15 C32 E51 E52 (search for similar items in EconPapers)
Date: 2008-04
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Citations: View citations in EconPapers (5)

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Journal Article: International evidence on stochastic and deterministic monetary neutrality (2008)
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