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assembling data from 1980 to 2002, and exclusively considering the long-term,
Wallace & Cabrera-Castellanos (2006), cannot reject the neutrality hypothesis
regarding both M1 and M2 with respect to real GDP.
In the case of Gonzalez Milan & Avila Arce (2012) find an inelastic (-0.0469) long-
term coefficient of GDP with respect to M2 for the Mexican economy from 1980 to
2007, on a quarterly basis, rejecting the neutrality hypothesis.
Considering the above results, the empirical evidence generally exposes a lack of
money neutrality when its effect in GDP is being estimated. As a result, there is a
convergence in terms of results in terms of different time periods and countries. On
the other hand, money supply shows that it influences the level of real output. As a
result, the expansion of real output could be accrued, up to a degree, to the money
supply. As a result, this suggests a modest accommodative monetary policy,
confined at least to the short-term. Likewise, a contractionary money supply could
hinder, up to a degree, the performance of real output within the same time span. It
is one of the outcomes of the money supply of not being neutral with respect to real
output.
7. Conclusions
The tenets of money neutrality were tested for the Mexican economy, comprising
from the first quarter if 1993 to the first semester of 2014, on a quarterly basis.
Regarding the effect of M1 in real output, a coefficient of zero in the long-term is to
be expected, according with the quantity theory. However, in the long-term, a
coefficient of 0.174 is found while in the short-term it rises to 0.315. As for M2, a