Variations in Prices due to Anticipated and Unanticipated Money
AbstractThe relation between money and price has unique relevance in price stability. Rational expectations theorists hold that both anticipated and unanticipated money supply affect price level. This paper addresses this issue and enquires if anticipated and unanticipated money supplies have any role in the variations in whole sale and consumer prices (WPI & CPI) in India over the period 1992:Q1 to 2010:Q3. It is found that both anticipated and unanticipated money supply shocks cause rise in WPI and CPI inflation and justifying the rational expectations proposition. Price level, therefore, can be stabilized through appropriate monetary management.
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Bibliographic InfoArticle provided by Asian Economic and Social Society in its journal Asian Economic and Financial Review.
Volume (Year): 2 (2012)
Issue (Month): 1 (March)
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Anticipated Money; Unanticipated Money; Cointegration; Causality; Rational Expectations;
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- Ghani, Ejaz, 1991. "Rational expectations and price behavior : A study of India," Journal of Development Economics, Elsevier, vol. 36(2), pages 295-311, October.
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