Is monetary policy really neutral in the long-run? Evidence for some emerging and developed economies

Reginaldo Nogueira

Economics Bulletin, 2009, vol. 29, issue 3, 2432-2437

Abstract: The traditional economic theory suggests that changes in the money supply or in the interest rates can influence the business cycle, but not the long-run potential output. In other words, monetary policy is neutral over the long-run. In this paper we use some new developments in econometrics to test for the existence of a long-run relationship between the monetary policy instrument used by most Central Banks - short-term interest rates - and real output. Using annual data for 14 emerging and developed countries our results offer overall support for the traditional economic theory.

Keywords: Money neutrality; monetary policy; cointegration tests. (search for similar items in EconPapers)
JEL-codes: E0 E4 (search for similar items in EconPapers)
Date: 2009-09-28
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Citations: View citations in EconPapers (16)

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