Monetary aggregates and macroeconomic performance: The Portuguese Escudo, 1911–1999

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This paper provided a full characterization of several monetary aggregates over Portuguese's historical economic business cycles. By focusing on the 1911–1999 period, the paper also revisits the issue of the role of money on real macroeconomic outcomes, inspired from the monetarists versus Keynesians debate on quest for validity of money (non-)neutrality. By means of descriptive statistics we first uncover that money changes were associated with changes in real economic activity. Most monetary aggregates are more volatile than GDP, display high serial autocorrelation, are generally countercyclical and lead the economic cycle. Then, through econometric analysis, our results show that our monetary series were characterized by unit roots and were cointegrated with real GDP. Evidence also suggested that money supply Granger-caused real GDP. Finally, both variance decomposition and impulse response function analyses from an estimated BVAR, uncovered a persistent and mutual effect running from a shock in real GDP to monetary aggregates and vice versa, therefore supporting the money non-neutrality hypothesis in the case of Portugal.

Original languageEnglish
Pages (from-to)719-740
JournalInternational Economic Journal
Issue number4
Publication statusPublished - Oct 2019


  • BVAR
  • causality
  • cointegration
  • Monetary aggregates
  • structural breaks
  • unit roots
  • VECM


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