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 Argen tina and over 1912-1995 for Brazil, it is found that money is long-run neut ral but not long-run superneutral with regard to real output. A rise in mon ey growth is associated with a decline in output - the opposite of the Tobi n effect. The introduction of dummy variables for 1930s or to capture recen t periods of financial disruption associated with bank insolvencies does no t restore long-run superneutrality for either country. However, results ind icate that bank insolvency episodes have a distinct and negative influence on output. (C) 2000 Elsevier Science B.V. All rights reserved. JEL classifi cation: E31; E51.