An empirical analysis of the money demand function in India


Autoria(s): Inoue, Takeshi; Hamori, Shigeyuki
Data(s)

30/09/2008

30/09/2008

01/09/2008

Resumo

This paper empirically analyzes India’s money demand function during the period of 1980 to 2007 using monthly data and the period of 1976 to 2007 using annual data. Cointegration test results indicated that when money supply is represented by M1 and M2, a cointegrating vector is detected among real money balances, interest rates, and output. In contrast, it was found that when money supply is represented by M3, there is no long-run equilibrium relationship in the money demand function. Moreover, when the money demand function was estimated using dynamic OLS, the sign onditions of the coefficients of output and interest rates were found to be consistent with theoretical rationale, and statistical significance was confirmed when money supply was represented by either M1 or M2. Consequently, though India’s central bank presently uses M3 as an indicator of future price movements, it is thought appropriate to focus on M1 or M2, rather than M3, in managing monetary policy.

Identificador

IDE Discussion Paper. No. 166. 2008.9

http://hdl.handle.net/2344/783

IDE Discussion Paper

166

Idioma(s)

en

eng

Publicador

Institute of Developing Economies, JETRO

日本貿易振興機構アジア経済研究所

Palavras-Chave #Cointegration #DOLS #Money #Money demand #Monetary policy #India #共和分分析 #動的最小二乗法 #通貨 #貨幣需要 #金融政策 #インド #337.225 #ASII India インド #E41 - Demand for Money #E51 - Money Supply; Credit #332.4
Tipo

Working Paper

Technical Report