International Evidence on the Long-Run Impact of Inflation

In this paper, I use a structural vector autoregression framework to analyze the effects of a permanent change in inflation on the long-run real interest rate and real output level in 14 industrialized countries. Long-run monetary superneutrality is rejected for all 14 countries using annual data: the results indicate that a permanent increase in inflation lowers the long-run real interest rate in each country; a permanent increase in inflation also increases the long-run real output level in a number of countries. Long-run monetary superneutrality is also rejected for four out of the five countries examined using quarterly data.