Tests of the Money Neutrality and Rationality Hypotheses: The Case of Japan 1973-1985.

This study examines the Macroeconomic Rational Expectations Hypothesis for Japan in the period 1973-1985. Monthly, seasonally - unadjusted data and the empirical methodology utilized by Frederic S. Mishkin ( 1982) are used to test the hypotheses of money neutrality and rationality of expectation formation jointly and separately. Two alternative methods of inducing stationarity in the output data are employed. The tests reject the joint hypothes es of money neutrality and rationality as well as the separate hypothesis of money neutrality. The separate hypothesis of rationality cannot be rejected. Copyright 1986 by Ohio State University Press.