The M2 Demand in Japan: Shifted and Unstable?Tomoo Yoshida and Robert H. Rasche This paper investigates the stability of M2 demand in Japan using the statistical technique recently developed by Johansen (1988) and Johansen and Juselius (1989). Long-run equilibrium money demand function is identified and estimated along with the fourvariable vector error correction model (VECM). The results strongly suggests that the function shifted upwards - while leaving the income elasticity unchanged - in mid-1985, when the interest rates on large time deposits were deregulated. Views expressed in Monetary and Economic Studies are those
of the authors and do not necessarily reflect those of the Bank
of Japan or Institute for Monetary and Economic Studies. |
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