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A Time Series Analysis of Economical Phenomena in Japan’s Lost Decade (1): Determinacy Property of the Velocity of Money and Equilibrium Solution

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  • Yuji Nakano

    ()

  • Yasunori Okabe

    ()

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    Abstract

    The extended velocities of money given by the ratio of NGDP and M 2 +CD in Japan’s lost decade are analyzed through the non-linear time series analysis based upon the theory of KM 2 O-Langevin equations. The time series of logarithmic returns of some extended velocities of money are judged to have a determinacy property in a specified time domain whose final time coincides with the time 1999q1 when the Bank of Japan took the zero interest rate policy. This implies that there exists a stochastic process with the time series stated above its realization and it satisfies certain functional relation. This gives a meaning from a viewpoint of time series analysis that the velocity of money can be regarded as an equilibrium solution of the demand and the supply between the goods market and the money market. Copyright Springer Science+Business Media, LLC. 2012

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    File URL: http://hdl.handle.net/10.1007/s10690-012-9154-z
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    Article provided by Springer & Japanese Association of Financial Economics and Engineering in its journal Asia-Pacific Financial Markets.

    Volume (Year): 19 (2012)
    Issue (Month): 4 (November)
    Pages: 371-389

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    Handle: RePEc:kap:apfinm:v:19:y:2012:i:4:p:371-389
    DOI: 10.1007/s10690-012-9154-z
    Contact details of provider: Web page: http://www.springer.com

    Web page: http://www.jafee.gr.jp/

    Order Information: Web: http://www.springer.com/finance/journal/10690/PS2

    Keywords: Extended velocity; Zero interest rate policy; Test(D); Determinacy property; Equilibrium solution;

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    1. Fumio Hayashi & Edward C. Prescott, 2004. "The 1990s in Japan: a lost decade," Chapters,in: The Economics of an Ageing Population, chapter 2 Edward Elgar Publishing.
    2. Fumio Hayashi & Edward C. Prescott, 2002. "The 1990s in Japan: A Lost Decade," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(1), pages 206-235, January.
    3. R. Anton Braun & Yuichiro Waki, 2006. "Monetary Policy During Japan'S Lost Decade," The Japanese Economic Review, Japanese Economic Association, vol. 57(2), pages 324-344.
    4. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-438, July.
    5. Sims, Christopher A, 1972. "Money, Income, and Causality," American Economic Review, American Economic Association, vol. 62(4), pages 540-552, September.
    6. Hsiao, Cheng, 1981. "Autoregressive modelling and money-income causality detection," Journal of Monetary Economics, Elsevier, vol. 7(1), pages 85-106.
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