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.
Keywords: Long-run monetary neutrality; Long-term time-series data; Structural changes; Unit root tests; Bivariate structural vector autoregression (VAR)
Views expressed in the paper are those of the authors and do not necessarily reflect those of the Bank of Japan or Institute for Monetary and Economic Studies.