New Evidence on Long-Run Monetary Neutrality

This paper re-examines the issue of long-run monetary neutrality by using fractional integration and allowing for a possible structural break in six countries: the United States, the United Kingdom, Mexico, Brazil, Australia and Argentina. We use an extension of Fisher and Seater's (1993) reduced-form test recently proposed by Bae, Jensen and Murdock (2005). The results show that long-run monetary neutrality holds for five countries when no structural breaks are taken into account, and for all countries if one break is allowed.

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