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A note on excess money growth and inflation dynamics: evidence from threshold regression

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  • Saumitra, Bhaduri
  • Raja, Sethudurai

Abstract

We test the effect of excess money growth on inflation using Threshold Regression technique developed by Hansen (2000). The empirical test is conducted using annual data from India for the period from 1953-54 to 2007-08. The results clearly exhibits that the relationship is not linear and without a strong credit growth, excess money growth has lesser inflationary effects.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 38036.

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Date of creation: 11 Apr 2012
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Handle: RePEc:pra:mprapa:38036

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Keywords: Excess Money Growth; Quantity Theory of Money; Inflation and Threshold Regression;

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  1. Detken, Carsten & Smets, Frank, 2004. "Asset price booms and monetary policy," Working Paper Series 0364, European Central Bank.
  2. Barbara Roffia & Andrea Zaghini, 2007. "Excess Money Growth and Inflation Dynamics," International Finance, Wiley Blackwell, vol. 10(3), pages 241-280, December.
  3. Lucas, Robert E, Jr, 1980. "Two Illustrations of the Quantity Theory of Money," American Economic Review, American Economic Association, vol. 70(5), pages 1005-14, December.
  4. José Ferreira Machado & João Sousa, 2006. "Identifying asset price booms and busts with quantile regressions," Working Papers w200608, Banco de Portugal, Economics and Research Department.
  5. Claudio E. V. Borio & Philip Lowe, 2004. "Securing sustainable price stability: should credit come back from the wilderness?," BIS Working Papers 157, Bank for International Settlements.
  6. Luca Benati, 2005. "U.K. Monetary Regimes and Macroeconomic Stylised Facts," Computing in Economics and Finance 2005 107, Society for Computational Economics.
  7. Stefan Gerlach & Lars E.O. Svensson, 2000. "Money and Inflation in the Euro Area: A Case for Monetary Indicators?," NBER Working Papers 8025, National Bureau of Economic Research, Inc.
  8. Oecd, 2006. "Are House Prices Nearing a Peak?: A Probit Analysis for 17 OECD Countries," OECD Economics Department Working Papers 488, OECD Publishing.
  9. Lothian, James R, 1985. "Equilibrium Relationships between Money and Other Economic Variables," American Economic Review, American Economic Association, vol. 75(4), pages 828-35, September.
  10. Albert Jaeger, 2003. "The ECB'S Money Pillar," IMF Working Papers 03/82, International Monetary Fund.
  11. Bruce E. Hansen, 2000. "Sample Splitting and Threshold Estimation," Econometrica, Econometric Society, vol. 68(3), pages 575-604, May.
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Cited by:
  1. Asongu Simplice, 2013. "How would monetary policy matter in the proposed African monetary unions? Evidence from output and prices," Working Papers 13/013, African Governance and Development Institute..
  2. Asongu Simplice, 2012. "Fighting consumer price inflation in Africa. What do dynamics in money, credit, efficiency and size tell us?," Working Papers 12/011, African Governance and Development Institute..
  3. Asongu Simplice, 2013. "A note on the long-run neutrality of monetary policy: new empirics," Working Papers 13/032, African Governance and Development Institute..
  4. Asongu Simplice, 2013. "New Empirics of monetary policy dynamics: evidence from the CFA franc zones," Working Papers 13/016, African Governance and Development Institute..
  5. Asongu Simplice, 2013. "Correcting inflation with financial dynamic fundamentals: which adjustments matter in Africa?," Working Papers 13/003, African Governance and Development Institute..
  6. Asongu, Simplice A, 2013. "Does Money Matter in Africa? New Empirics on Long- and Short-run Effects of Monetary Policy on Output and Prices," MPRA Paper 48494, University Library of Munich, Germany.

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