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are different from zero, it appears that money is not strictly neutral with respect to
GDP. In consequence, money supply has had a modest incidence in the level of
output for the Mexican GDP for the period as from 1993.
It should be mentioned that within the above time span, a change in the velocity of
circulation took place. Its reduction was at a rate of 4.3% a year. According to the
quantity theory, such contraction should have contributed to an appeasement in
inflation. However, this abatement appears to have been sufficient enough to
reduce well below the expected unitary long-term coefficient.
Regarding the effect of M2 in real output, a long-term coefficient of 0.185 was
obtained for Mexico. In the short-term, the coefficient comes out to be 0.239. While
these coefficients are small, they are not negligible.
As a result, money neutrality
does not hold regarding the effect of M2 in the Mexican output. For these results,
the first time period comprises from the first quarter of 1993 to the second of 2014
regarding the long-term. As for the short-term, the period extends from the second
quarter of 1993 to the second quarter of 2014.
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This is with the exception of the first semester of 1995, when a substantial
increase in the money supply took place as a result of devaluation, followed by an
ensuing price rise. The estimation of the above mentioned rate is reported in
Annex IV, while the order of integration of the variable used is being reported in
Annex V.
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Regarding the long-term, a 99% significance was obtained. However, in the
short-term, the significance is 90%.