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RESEARCH PAPER
Is Money Neutral in the Polish Economy? Common Stochastic Trends Analyses in the I(2) Space
1
Wydział Ekonomiczno-Socjologiczny, Uniwersytet Łódzki, Polska
Submission date: 2025-08-15
Final revision date: 2025-12-06
Acceptance date: 2025-12-09
Publication date: 2026-09-30
GNPJE 2026;327(3):111-125
KEYWORDS
JEL CLASSIFICATION CODES
ABSTRACT
Non-stationarity of the stochastic processes generating the data requires the application of cointegrated VAR models in empirical work. The general long-run money neutrality (LRN) hypothesis, which is the central issue addressed in this paper, can be verified exclusively through common stochastic trends analyses combined with restriction testing, or through impulse-response analyses. We applied the first approach. The results do not confirm the general LRN hypothesis, but they do support the hypothesis that money has a long-run influence on prices, nominal wages, the exchange rate and the interest rate. Money proved to be neutral with respect to production and the unemployment rate. The empirical findings point to the endogenous character of money and the mixed nature of inflation.Verifying the LRN hypothesis for I(2) processes may offer an alternative approach for policy studies based on the Taylor rule.
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