Seasonal cointegration and the money demand function: some evidence from Japan

Abstract

The stability of the Japanese money demand function is empirically analysed employing the notion of seasonal cointegration. It is found that money balances, interest rates, and real GDP have unit roots in different cycles. The seasonal cointegration tests reveals that seasonal cointegration is rejected in every case. This fact indicates that no stable relationship exists between money supply and the real economy during the period under analysis.