An Empirical Study on Long-Run Neutrality of Money in the Japanese Economy

Jahanur Rahman and Toshihisa Toyoda

Japanese Economy, 2008, vol. 35, issue 3, 87-117

Abstract: Previous tests of the long-run neutrality of money hypothesis have generally relied on seasonally adjusted data and overlooked the important issues of seasonality. This article analyzes the long-run neutrality of money in Japan using quarterly seasonally unadjusted data, which permit an examination of the effects of seasonality and the robustness of previous empirical results. Fisher and Seater (1993) methodology is used with both seasonally unadjusted and adjusted Japanese real gross domestic product and nominal money supply to test the long-run neutrality of money hypothesis. Using two measures of money stock, namely, M1 and M2, it is shown that the hypothesis is supported using M2 as the measure of money supply, while it is rejected using M1.

Date: 2008
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DOI: 10.2753/JES1097-203X350304

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