Department of Economics

University of Delaware

Working Paper #2005-04

IS MONEY NEUTRAL IN THE LONG RUN?

Burton A. Abrams*
University of Delaware

 and

 Russell F. Settle
University of Western Washington

The traditional neoclassical open-economy flexible exchange rate model is expanded to include a “credit channel” by incorporating a bank loan market.  The new “credit view” model provides substantially different predictions concerning the neutrality of money and the types of autonomous shocks that might affect the real exchange rate. 

JEL Classifications: F41, E51