Testing the long-run neutrality of money in a developing economy: The case of India

Seasonal integration and cointegration techniques are used to test the hypothesis of long-run money neutrality using Indian data. On the basis of money, real output and price level quarterly data, empirical evidence is presented showing that money is cointegrated with prices but not with output at the zero frequency. This evidence is interpreted to imply that money affects nominal but not real variables in the long run. It is concluded that money is neutral in the long run. (C) 1997 Elsevier Science B.V.