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Original Articles

M2 demand relation and effective exchange rate in Japan: a cointegration analysis

Pages 229-232 | Published online: 07 Oct 2010
 

Abstract

The paper examines whether M2 demand in Japan does not form a cointegrated system unless the effective exchange rate is included. We focus on testing statistical significance of the coefficient for the effective exchange rate in the long-run equilibrium M2 demand relation. Empirical results indicate that it is significant, which suggests that the effective exchange rate is necessary for Japanese M2 demand cointegration.

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