Long Run Neutrality and Superneutrality of Money: Aggregate and Sectoral Tests for Nicaragua

The Fisher-Seater (1993) methodology is applied to Nicaraguan data to test for long run neutrality and superneutrality of money. Real GDP and real output in six broadly defined sectors are I(1), while the money supply is I(2). These orders of integration imply that money is neutral with respect to both aggregate and sectoral output. However, superneutrality is rejected for real GDP as well as for all six sectors. Results of the superneutrality tests suggest that inflation driven by money growth imposed real costs on the private sector while the government sector