On Long-Run Monetary Neutrality in Japan

Hiroyuki Oi, Shigenori Shiratsuka, and Toyoichiro Shirota

This paper comprehensively investigates long-run monetary neutrality in Japan , with due consideration to the order of integration of the money stock and real output, mainly using long-term time-series data retroactively available from the Meiji Period (1868?1912). The empirical results indicate little evidence against the long-run neutrality of money (especially defined as M2) with respect to real GNP. In addition, such findings are robust to a wide range of identifying assumptions.

Key words: Long-run monetary neutrality; Long-term time-series data; Structural changes; Unit root tests; Bivariate structural vector autoregression (VAR)

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