Kent

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. Keywords: Long-run monetary neutrality; Long-term time-series data; Structural changes; Unit root tests; Bivariate structural vector autoregression (VAR) JEL Classification: C22, C32, E40, E51

Hiroyuki Oi: Institute for Monetary and Economic Studies, Bank of Japan (E-mail: hiroyuki.ooi @boj.or.jp) Shigenori Shiratsuka: Institute for Monetary and Economic Studies, Bank of Japan (E-mail: [e-mail]) Toyoichiro Shirota: Institute for Monetary and Economic Studies, Bank of Japan (currently Ohio State University) (E-mail: [e-mail]) The authors would like to thank Professors Yuzo Honda, Yukinobu Kitamura, Ryuzo Miyao, Masao Ogaki, and Etsuro Shioji, and the staff of the Monetary Affairs Department, Research and Statistics Department, and the Institute for Monetary and Economic Studies (IMES) of the Bank of Japan for their valuable comments. Regardless, the opinions expressed in this paper are those of the authors, and do not represent the official views of the Bank of Japan or IMES.
MONETARY AND ECONOMIC STUDIES /OCTOBER 2004 DO NOT REPRINT OR REPRODUCE WITHOUT PERMISSION.

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I. Introduction
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).

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