Neutrality of Anticipated Money Growth; Aggregate Level Impressions Versus Disaggregated Impacts
Date
1987-06
Authors
Gauger, Jean
Enders, Walter
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Abstract
The "neutrality" models in new classical macroeconomic theory assert the anticipated portion of money growth does not have real economic impacts, only the unanticipated portion of money growth affects real economic activity. Results from a variety of empirical tests using aggregate level data support the neutrality proposition. As is explained below, these aggregate level results increase the need for disaggregated testing to achieve a more precise examination of the neutrality proposition. This research examines the conclusions from aggregate level versus disaggregated tests of the neutrality hypothesis, controlling for differences in the econometric test procedures. The research here finds that testing with aggregate level data does produce an appearance of support for the "only unanticipated money growth matters" hypothesis. However, disaggregated examination reveals that anticipated money growth is having significant real economic impacts on producers* output. "Neutrality" in the sense implied by the theoretical models does not hold. Therefore, as the research here shows, solely aggregate level testing can
produce misleading impressions with respect to anticipated money growth neutrality.
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article