Is There Long-Run Monetary Neutrality in Russia?

One theoretical tradition holds that money is neutral in the long run. Although the neutrality of money is an attractive doctrine in economics, the empirical evidence for it is somewhat ambiguous; this uncertainty opens up debate about how to choose the target for monetary policy. The purpose of this paper is to apply econometric analysis to test the hypothesis that money exhibits long-term neutrality and superneutrality in Russia. The article considers the long-term impact on real output and its components (consumption, government expenditure, and gross investment) from permanent shocks to various monetary aggregates. The resulting calculations show that, for the Russian economy from 1995 to 2023, neither hypothesis can be rejected in general — money is neutral and even superneutral. This conclusion is robust across different monetary aggregates. This means that monetary expansion is unlikely to increase production in the long term but will merely result in higher prices. The study found no evidence that non-neutrality was a factor in the investment channel. Therefore, the position that aggressive easing of monetary policy stimulates investmentdriven economic growth is not supported by the data. The best way for the Central Bank of Russia to provide conditions conducive to economic growth would be to ensure low and stable inflation.