Tests of the money neutrality and rationality hypotheses: the case of Japan 1973-1985

Deskripsi

Examines the validity of the macroeconomic rational expectations (MRE) hypothesis in Japan, focusing on the neutrality of money—the idea that anticipated monetary policy has no real effects—and the rationality of expectations formation. Using monthly data from 1973 to 1985, Gochoco employs nonlinear estimation techniques to test whether anticipated and unanticipated money growth impacts Japan’s industrial production.

Gochoco’s work underscores the importance of proper model specification and critiques earlier studies that used seasonally adjusted data or simplistic trend assumptions. The paper calls for further research to reconcile Japan’s apparent monetary non-neutrality with its stable inflation outcomes, offering insights for monetary policy design in similar economies.