Share This Article:

A Multivariate Long-Run Money Neutrality Investigation: Empirical Evidence for CAMEU

Abstract Full-Text HTML Download Download as PDF (Size:545KB) PP. 384-390
DOI: 10.4236/me.2013.45040    4,881 Downloads   6,315 Views   Citations

ABSTRACT

We examine the long run neutrality of money, in Central Africa Monetary and Economic Union (CAMEU) economies applying the multivariate methodology of King and Watson, using M2 and real output during the period 1970-2008. Tests consistently reject the long run money neutrality hypothesis. It is found that M2 has significant and positive impacts on real output of all CAMEU countries except for Gabon. The results are robust under other monetary aggregate variables and various sub-periods. In addition, the estimated coefficients are stable under two breakpoints corresponding to the dates of central bank reforms and devaluation of the local currency.

Conflicts of Interest

The authors declare no conflicts of interest.

Cite this paper

J. Ekomie, "A Multivariate Long-Run Money Neutrality Investigation: Empirical Evidence for CAMEU," Modern Economy, Vol. 4 No. 5, 2013, pp. 384-390. doi: 10.4236/me.2013.45040.

References

[1] M. Friedman, “Inflation: Causes and Consequences,” Asia Publishing House, New York, 1963.
[2] R. Lucas, “Expectations and the Neutrality of Money,” Journal of Economic Theory, Vol. 4, No. 6, 1972, pp. 103-124. doi:10.1016/0022-0531(72)90142-1
[3] R. Lucas, “Nobel Lecture: Monetary Neutrality,” Journal of Political Economy, Vol. 104, No. 2, 10996, pp. 661-682.
[4] T. Sargent and N. Wallace, “Rational Expectations, the Optimal Monetary Instrument, and the Optimal Money Supply Rule,” Journal of Political Economy Vol. 83, No. 2, 1975, pp. 241-254. doi:10.1086/260321
[5] J. Boschen and C. Otrok, “Long-Run Neutrality and Super-Neutrality in an ARIMA Framework: Comment,” American Economic Review, Vol. 84, No. 3, 1994, pp. 1470-1473.
[6] J. B. Bullard, “Testing Long-Run Monetary Neutrality Propositions: Lessons from the Recent Research,” Federal Reserve Bank of St. Louis Review, Vol. 81, No. 6, 1999, pp. 57-77.
[7] P. Coe and J. Nason, “The Long-Horizon Regression Approach to Monetary Neutrality: How Should the Evidence Be Interpreted?” Economics Letters, Vol. 1, No. 78, 2003, pp. 351-356. doi:10.1016/S0165-1765(02)00263-X
[8] R. G. King and M. W. Watson, “Testing Long-Run Neutrality,” Federal Reserve Bank of Richmond Economic Quarterly, Vol. 83, No. 3, 1997, pp. 69-101.
[9] R. Lucas, “Two Illustrations of the Quantity Theory of Money,” American Economic Review, Vol. 70, No. 5, 1980, pp. 1005-1014.
[10] S. Miyagawa and Y. Morita, “The Fisher Effect and the Long-Run Phillips Curve in the Case of Japan, Sweden and Italy,” Working Papers in Economics, No. 77, 2003.
[11] S. W. Chen, “Evidence of the Long-Run Neutrality of Money: The Case of South Korea and Taiwan,” Economics Bulletin, Vol. 3, No. 64, 2007, pp. 1-18.
[12] T. Mvondo, “L’hypothèse de Neutralité monEtaire: Une Application en Zone Franc,” Thèse pour le Doctorat en Sciences Economiques, Université Nancy, Nancy, 2011.
[13] S. Johansen, “Statistical Analysis of Cointegration Vectors,” Journal of Economic Dynamics and Control, Vol. 12, No. 2-3, 1988, pp. 231-254. doi:10.1016/0165-1889(88)90041-3
[14] R. Engle and C. W. J. Granger, “Cointegration and Error Correction: Representation, Estimation and Testing,” Econometrica, Vol. 55, No. 2, 1987, pp. 251-276. doi:10.2307/1913236

  
comments powered by Disqus

Copyright © 2019 by authors and Scientific Research Publishing Inc.

Creative Commons License

This work and the related PDF file are licensed under a Creative Commons Attribution 4.0 International License.