An Examination of the Macro Rational Expectations Hypothesis for the High Growth Period: The Case of Japan and Korea

This paper investigates the joint MRE hypothesis for high growth period of Japan and Korea. One of the major finding of the paper is that rational expectations hypothesis is not rejected even under the rapidly changing circumstances of high economic growth. These results support the modeling strategies in which expectations are assumed to be rational. The fact that we have contrasting results for the neutrality proposition for Japan and Korea may be an indirect evidence of the unimportant of the real effect of the expected overall growth money supply. The total effect of the anticipated M2 on real output has been small at the most.