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The vanishing role of money in the macro-economy: An empirical investigation for India

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  • Nachane, D.M.
  • Dubey, Amlendu Kumar
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    Abstract

    The recent de-emphasizing of the role of "money" in both theoretical macroeconomics as well as in the practical conduct of monetary policy sits uneasily with the idea that inflation is a monetary phenomenon. Empirical evidence has, however, been accumulating pointing to an important leading indicator role for money and credit aggregates with respect to long term inflationary trends. Such a role could arise from monetary aggregates furnishing a nominal anchor for inflationary expectations, from their influence on the term structure of interest rates and from their affecting transaction costs in markets. Our paper attempts to assess the informational content role of money in the Indian economy by a separation of these effects across time scales and frequency bands, using the techniques of wavelet analysis and band spectral analysis respectively. Our results indicate variability of causal relations across frequency ranges and time scales, as also occasional causal reversals.

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    Bibliographic Info

    Article provided by Elsevier in its journal Economic Modelling.

    Volume (Year): 28 (2011)
    Issue (Month): 3 (May)
    Pages: 859-869

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    Handle: RePEc:eee:ecmode:v:28:y:2011:i:3:p:859-869

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    Web page: http://www.elsevier.com/locate/inca/30411

    Related research

    Keywords: Money Inflation Cointegration Causality Decomposition Wavelets;

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    Cited by:
    1. Tiwari, Aviral Kumar & Mutascu, Mihai Ioan & Albulescu, Claudiu Tiberiu, 2013. "The influence of the international oil prices on the real effective exchange rate in Romania in a wavelet transform framework," Energy Economics, Elsevier, vol. 40(C), pages 714-733.
    2. Uddin, Gazi Salah & Tiwari, Aviral Kumar & Arouri, Mohamed & Teulon, Frédéric, 2013. "On the relationship between oil price and exchange rates: A wavelet analysis," Economic Modelling, Elsevier, vol. 35(C), pages 502-507.

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