Propositions about long-run neutrality are at the heart of macroeconomics. In the 1970s, Lucas and Sargent criticized traditional neutrality tests, suggesting that long-run propositions could not be tested without a detailed structural model. Yet, when nominal variables are integrated, long-run neutrality can be tested with limited structural information. Using a suitable econometric framework, we provide empirical tests of four long-run propositions: the neutrality of money, the superneutrality of money, the Fisher effect, and the vertical Phillips curve.
Amanda L. Kramer
To receive a notification by email when Economic Quarterly is posted online or to order single copies of past issues, click on the links below (published online only since 2012).