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International Journal of Applied Economic Studies (ISSN:2345-5721)

Studying the Neutrality of Money: An Evidence of OPEC Member States

Categories :Uncategorized

Abstract The main fundamental issue in developing oil exporting countries is that there is a disagreement between monetary policy makers and producers. Producers claim that the contraction of monetary policies reduces the output. In contrary with this, policymakers claim that the problem is low efficiency of producers. This paper studies the neutrality of money in OPEC member countries using panel approach during the period 1960-2013. Gross domestic product, liquidity, oil price, exchange rate, gross fixed capital formation and consumer price index are variables which were used in this investigation. The results of this research implied that there is a negative and significant relationship between liquidity and economic growth. A positive and significant relationship between inflation and economic growth is also founded. The results support that money is not neutral in mentioned countries. So, economists and policy makers ought to use appropriate monetary policies for reducing macroeconomic volatilities. JEL Classification: E4, E5

Keywords: Gross Domestic Product, Liquidity, Neutrality of Money, Oil Price, Organization of the Petroleum Exporting Countries.