Jump to ContentJump to Main Navigation
Show Summary Details
More options …

Review of Economic Perspectives

Národohospodárský obzor; The Journal of Masaryk University

4 Issues per year

CiteScore 2016: 0.50

SCImago Journal Rank (SJR) 2016: 0.262
Source Normalized Impact per Paper (SNIP) 2016: 0.516

Open Access
See all formats and pricing
More options …
Volume 16, Issue 3


The Long-Run Superneutrality of Money Revised: the Extended European Evidence

Oleg Deev
  • Corresponding author
  • Masaryk University, Faculty of Economics and Administration, Department of Finance, Lipová 41a, 602 00 Brno, Czechia
  • Email
  • Other articles by this author:
  • De Gruyter OnlineGoogle Scholar
/ Martin Hodula
  • VŠB-Technical University of Ostrava, Economic Faculty, Department of Economics, Sokolská třída 33, 701 21 Ostrava, Czechia
  • Email
  • Other articles by this author:
  • De Gruyter OnlineGoogle Scholar
Published Online: 2016-10-13 | DOI: https://doi.org/10.1515/revecp-2016-0012


This article investigates the validity of the money superneutrality concept for the large panel of European economies. While focusing exclusively on endogenous growth theories including the Mundell-Tobin effect, we examine the long-run response of real output to a permanent inflation shock in every studied country using a structural vector autoregressive framework. For the majority of countries in our sample, the longrun superneutrality concept is confirmed since the original increase/decrease in output growth fades in time. We also test the additional hypothesis of whether the group of countries with smaller in-sample inflation mean forms the exception to the long-run money superneutrality. As the result, modern economies might be better described from the viewpoint of Sidrauski.

Keywords: endogenous growth theories; superneutrality; SVAR


  • AHMED, S. (1993). Does Money Affect Output? Federal Reserve Bank of Philadelphia Business Review. July/August, pp. 13-28.Google Scholar

  • BAE, S.-K., JENSEN, M.J. and MURDOCK, S.G. (2005). Long-run neutrality in a fractionally integrated model. Journal of Macroeconomics. 27, pp. 257-274.CrossrefGoogle Scholar

  • BARRO, R. J. (1995). Inflation and economic growth, National Bureau of Economic Research Working Paper. No. 5326.Google Scholar

  • BASHAR, O. (2011). On the permanent effect of an aggregate demand shock: Evidence from the G7 countries. Economic modelling. 28(3), pp. 1374-1382. DOI: 10.1016/j.econmod.2011.02.013CrossrefWeb of ScienceGoogle Scholar

  • BLANCHARD, O., and QUAH D. (1989). The dynamic effects of aggregate demand and aggregate supply disturbances. American Economic Review. 79(1), pp. 655-673.Google Scholar

  • BULLARD, J., and KEATING J. W. (1995). The long-run relationship between inflation and output in postwar economies. Journal of Monetary Economics. 36(1), pp. 477-496. DOI: 10.1016/0304-3932(95)01227-3CrossrefGoogle Scholar

  • DEL BOCA, A., FRATIANNI, M., SPINELLI, F., and TRECROCI, C. (2010). Wage bargaining and the Phillips curve in Italy. MoFiR working paper. No. 41Google Scholar

  • ESPINOSA-VEGA, M., and RUSSELL, S. (1998). The Long-Run Real Effects of Monetary Policy: Keynesian Predictions from a Neoclassical Model. Federal Reserve Bank of Atlanta Working Paper 98-6.Google Scholar

  • FAMA, E.F. (1975). Short Term Interest Rates as Predictors of Inflation. American Economic Review. 65(1), pp. 269-282.Google Scholar

  • FARIA, J.R. (2001). Habit formation in a monetary growth model. Economic Letters. 73, pp. 51-55. DOI: 10.1016/S0165-1765(01)00464-5CrossrefGoogle Scholar

  • FISHER, M., and SEATER, J. (1993). Long-run neutrality and superneutrality in an ARIMA framework. American Economic Review. 83(1), pp. 402-415.Google Scholar

  • FRIEDMAN, M. (1948). A Monetary and Fiscal Framework for Economic Stability. American Economic Review. 38(3), pp. 245-264.Google Scholar

  • FRIEDMAN, M. (1968). The role of monetary policy. American Economic Review, 58, pp. 1-17.Google Scholar

  • HASLAG, J. H. (1997). Output, Growth, Welfare, and Inflation: A Survey. Federal Reserve Bank of Dallas Economic Review. 1997, pp. 11-21.Google Scholar

  • IVANOV, V., and KILIAN, L. (2001) A Practitioner's Guide to Lag-Order Selection for Vector Autoregressions. CEPR Discussion Papers. No. 2685.Google Scholar

  • KANDEL S., OFER A. R., and SARIG O. (1996). Real Interest Rates and Inflation: An Ex-Ante Empirical Analysis. Journal of Finance (LI), pp. 205-225. DOI: 10.1111/j.1540-6261.1996.tb05207.x CrossrefGoogle Scholar

  • KEYNES, J.M. (1973). The Collected Writings of J.M. Keynes, In The General Theory of Employment, Interest, and Money. Macmillan: London, vol. XIV.Google Scholar

  • KOTLÁN, I. (2008). Je inflační nejistota prospěšná? Národohospodářský obzor. 8(1-2), pp. 32-49.Google Scholar

  • KOUSTAS, Z. and SERLETIS, A. (2003). Long-run Phillips-type trade-offs in European Union countries. Economic Modelling. 20(4), pp. 679-701. DOI: 10.1016/S0264-9993(02)00002-0CrossrefGoogle Scholar

  • LUETKEPOHL, H. (2011). Vector autoregressive models. EUI Working Papers. No. 30. Google Scholar

  • MANCHESTER, J. (1989). How Money Affects Real Output. Journal of Money, Credit and Banking. 21(1), pp. 16-32 DOI: 10.2307/1992575.CrossrefGoogle Scholar

  • MANKIW, N. G. (1987). The Optimal Collection of Seigniorage. Journal of Monetary Economics. 20(1), pp. 327-341. DOI: 10.1016/0304-3932(87)90019-5CrossrefGoogle Scholar

  • MISHKIN, F. S. (1992). Is Fisher Effect for Real: A Reexamination of the Relationship Between Inflation and Interest Rates. Journal of Monetary Economics. 30(1), pp. 195-215.CrossrefGoogle Scholar

  • MOTLEY, B. (1998). Growth and inflation: a cross-country study. Federal Reserve Bank of San Francisco Economic Review. 1, pp. 15-28.Google Scholar

  • MUNDELL, R. (1963). Inflation and Real Interest. Journal of Political Economy. 71(3), pp. 280-283. DOI: 10.1086/258771CrossrefGoogle Scholar

  • NELSON, C.R., and SCHWERT, G.W. (1977). Short Term Interest Rates as Predictors of Inflation: On Testing the Hypothesis that the Real Rate of Interest is Constant. American Economic Review. 67(1), pp. 478-486.Google Scholar

  • NORIEGA, A.E., SORIA, L.M. and VELÁZQUEZ R. (2008). International evidence on stochastic and deterministic monetary neutrality. Economic Modelling. 25, pp. 1261-1275. DOI: 10.1016/j.econmod.2008.04.005Web of ScienceCrossrefGoogle Scholar

  • PATINKIN, D. (1987). Neutrality of Money. In The New Palgrawe: A Dictionary of Economics, ed. J. Eatwell, M. Milgate, P. Newman.Google Scholar

  • RAPACH, D. E. (2011). International evidence on the long-run superneutrality of money. Working Paper. Retrieved from: http://citeseerx.ist.psu.edu/viewdoc/download?doi= Google Scholar

  • RIGGI, M., and SANTORO, S. (2015). On the Slope and the Persistence of the Italian Phillips Curve. International Journal of Central Banking. 11(2), pp. 157-197.Google Scholar

  • SIDRAUSKI, M. (1967). Rational Choice and Patterns of Growth in a Monetary Economy. The American Economic Review. 57(2), pp. 534-544.Google Scholar

  • STOCKMAN, A. C. (1981). Anticipated Inflation and the Capital Stock in a Cash-in- Advance Economy. Journal of Monetary Economics. 8(4), pp. 387-93. DOI: 10.1016/0304-3932(81)90018-0CrossrefGoogle Scholar

  • TOBIN, J. (1965). Money and Economic Growth. Econometrica. 33(4), pp. 671-684.CrossrefGoogle Scholar

  • WEBER, A. (1994). Testing long-run neutrality: Empirical evidence for G7 countries with special emphasis on Germany. Carnegie-Rochester Conference Series on Public Policy. 41(1), pp. 67-117. DOI: 10.1016/0167-2231(94)00014-X CrossrefGoogle Scholar

About the article

Received: 2015-07-13

Accepted: 2016-08-11

Published Online: 2016-10-13

Published in Print: 2016-09-01

Citation Information: Review of Economic Perspectives, Volume 16, Issue 3, Pages 187–203, ISSN (Online) 1804-1663, DOI: https://doi.org/10.1515/revecp-2016-0012.

Export Citation

© by Oleg Deev. This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License. BY-NC-ND 4.0

Comments (0)

Please log in or register to comment.
Log in