Determination of Money Supply in India: The Great Debate
AbstractResearchers reported that - there were two approaches to money supply determination in India: balance sheet or structural approach and money multiplier approach; the former focused on individual items in the balance sheet of the consolidated monetary sector in order to explain changes in money supply and the latter focused on the relationship between money stock and reserve money; the money multiplier approach emerged strongly as a critic to the balance sheet approach; between January 1976 and January 1978 there was a hot and rich debate between two groups of researchers, one group led by Gupta who believed in the money multiplier theory, the other group of RBI economists, who were not accepting this theory; the debate gave rise to a number of research papers where mostly regression techniques were used to estimate and forecast money supply function; Bhattacharya (1972), Gupta (1972) and Marwah (1972) used regression techniques to estimate money multiplier in India four years before the debate took place. The above debate is narrated below in an analytical style.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 22858.
Date of creation: 2010
Date of revision:
money supply; high powered money; reserve money; RBI; Working Group; multiplier; balance sheet; forecast; currency;
Find related papers by JEL classification:
- E0 - Macroeconomics and Monetary Economics - - General
- E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-06-04 (All new papers)
- NEP-CWA-2010-06-04 (Central & Western Asia)
- NEP-HIS-2010-06-04 (Business, Economic & Financial History)
- NEP-HPE-2010-06-04 (History & Philosophy of Economics)
- NEP-MAC-2010-06-04 (Macroeconomics)
- NEP-MON-2010-06-04 (Monetary Economics)
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- Das, Rituparna, 2009. "Endogenous Money, Output and Prices in India," MPRA Paper 14252, University Library of Munich, Germany.
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