New Approach to Explain Neutrality of Money

Alexander Bandura
2017 Naukovì Zapiski NaUKMA: Ekonomìčnì Nauki  
This paper presents a new explanation of neutrality of money in general case, regardless of the duration. It is based on the CMI-model of macroeconomic dynamics, which proposes the fundamental relationship between the efficiency of the use of production resources, money supply, inflation, and dynamics of the economic growth. This relationship is proved empirically by its testing on the examples of two completely different economies (the U.S. and Ukrainian ones). The testing period covers
more » ... eriod covers several consecutive real business cycles for each of these economies. According to this relationship, the value of money supply affects GDP growth rate in every period of time. Thus, monetary aggregate M2 is divided in two parts: one part is always non-neutral and the other is always neutral, both in the short run and in the long run.
doi:10.18523/2519-4739212017119738 fatcat:od7a75um5fb4bbvsv3dtkkb4om