ON THE NEUTRALITY OF INSIDE AND OUTSIDE MONEY

The relationships between nominal inside money and real economic activ ity and nominal outside money and real economic activity are explored using data on checkable deposits, M2 excluding currency, the monetary base, and real income in the United States from 1900 to 1992. This is done by calculating the long-run elasticities of real output with resp ect to inside and outside components of the money stock. Small but sig nificant deviations from neutrality are detected for inside money over a range of identifying assumptions. The evidence suggests, however, t hat the source of non-neutrality is not the one hypothesized by Gurley and Shaw (1960).