Tests for the long-run neutrality of money - The case of Nicaragua

The Fisher-Seater (1993) methodology is applied to Nicaraguan data in order to test for long-run neutrality and superneutrality of money. Both the monetary base and M2a are found to be 1(2) variables while real GDP is I (1). Given these orders of integration, the neutrality hypothesis cannot be rejected under their test. Furthermore, neither of the measures of money is superneutral but the evidence against the proposition is not strong. The results suggest that inflation imposed real costs on the economy.