The relation between inflation, M1 money, and real GDP in Mexico is examined using annual data from 1944 to 1991. When investigating the relation between changes in inflation and real GDP growth it is found that it is important to separate the changes in inflation into predictable and...

The long-run neutrality of money on real output is tested for Mexico using a model developed by Fisher and Seater. The empirical evidence supports the neutrality hypothesis. The results are robust for both M1 and M2 and an alternative model specification.