Long-run neutrality, high inflation, and bank insolvencies in Argentina and Brazil

Using long, low frequency data on money and output over 1884-1996 for Argentina and over 1912-1995 for Brazil, it is found that money is long-run neutral but not long-run superneutral with regard to real output. A rise in money growth is associated with a decline in output" the opposite of the Tobin effect. The introduction of dummy variables for 1930s or to capture recent periods of financial disruption associated with bank insolvencies does not restore long-run superneutrality for either country. However, results indicate that bank insolvency episodes have a distinct and negative influence on output.