Causal Relation Between Money Supply and Exchange Rate in India Under the Basket Peg and Market Determination Regimes: A Time Series Analysis
Abstract: Mundell-Fleming model of open economy macroeconomics has amply established that the nature and direction of causal relationship between money supply and exchange rate depend on the exchange rate regimes. Particularly bidirectional causal relation between domestic money supply and exchange rate is the common phenomenon in the pegged regime of exchange rate, while unidirectional causality running from money supply to exchange rate is the feature of the market determination regime. This study is devoted to enquire into these issues in the context of Indian exchange rate regimes. Using quarterly time series data of the variables concerned, the study bears the evidence that under the basket peg and market determination exchange rate regimes money supply and rupee/dollar exchange rate in India are cointegrated. In the era of basket peg, bidirectional Granger causality is established, while in the era of market determined regime, unidirectional Granger causality running from money supply to exchange rate has been testified.
Download InfoTo our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Bibliographic InfoArticle provided by IUP Publications in its journal The IUP Journal of Applied Economics.
Volume (Year): X (2011)
Issue (Month): 2 (April)
Contact details of provider:
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (G R K Murty).
If references are entirely missing, you can add them using this form.