The Journal of Economic Studies and Policies

The Journal of Economic Studies and Policies

Testing the Long Run Neutrality and Super-Neutrality of Money in Iran

Document Type : Original Article

Authors
Akbar komijani 1
Saied Bayat 2
Seyed Mohammad Mahdi Sobhanian 2
1 Professor, Faculty of Economics, University of Tehran
2 PhD student, Faculty of Economics, University of Tehran
10.22096/esp.2013.26150
Abstract
Expansionary monetary policy for improving economic growth and financing budget deficit through oil revenues has caused continuous increase in money and liquidity. If money is neutral, it can be accepted that the above mentioned policies are only inflationary and don’t affect real variables.
In this paper, using Iranian economic data since 1973 to 2009 and based on Fisher-Seater method, long run neutrality and super-neutrality of money were tested. Our results show that neutrality of money doesn’t depend on money definition such that both money and liquidity are neutral. Also, because money and liquidity growth are integrating with degree one (I) and don’t have long run trend, we cannot discuss about long run super-neutrality of money and liquidity based on Fisher-Seater method. So, we can conclude that expansionary monetary policy cannot increase output in long run and policymakers should focus on labor and capital productivity improvement for attaining sustainable economic growth.
Keywords
Neutrality
Super-Neutrality
Monetary policy
economic growth
Fisher-Seater Method

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