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Financial Innovation and Stability of Money Demand Function in Post–reform period in India

Author

Listed:
  • Prakash Singh

    () (Institute of Economic Growth)

  • Manoj Kumar Pandey

    () (Australia South Asia Research Center, Australian National University, Canberra)

Abstract

Innovation in financial sector, financial reforms and changes in the policy environment are the factors responsible for instability in the money demanded in an economy. The dawn of 1991 balance of payment crisis in India brought much needed reforms in the economy and financial sector and triggered financial innovation fueled with revolution in information technology world wide and in India. In this backdrop this paper attempts to take a meticulous look on stability of money demand in India with quarterly data for 1996–97:1–2009–10:3 period. Based on Gregory–Hansen (1996) method of co–integration estimation the analysis confirms that in contrast to most of the previous studies, money demand function in India is not stable in the post reform period.

Suggested Citation

  • Prakash Singh & Manoj Kumar Pandey, 2010. "Financial Innovation and Stability of Money Demand Function in Post–reform period in India," Economics Bulletin, AccessEcon, vol. 30(4), pages 2895-2905.
  • Handle: RePEc:ebl:ecbull:eb-10-00336
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2010/Volume30/EB-10-V30-I4-P266.pdf
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    Citations

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    Cited by:

    1. Nitin, Arora & Asghar, OsatiEraghi, 2016. "Does India have a stable demand for money function after reforms? A macroeconometric analysis," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 44, pages 25-37.
    2. repec:sae:globus:v:18:y:2017:i:4:p:811-824 is not listed on IDEAS
    3. Muhammad Ahad, 2017. "Financial Development and Money Demand Function: Cointegration, Causality and Variance Decomposition Analysis for Pakistan," Global Business Review, International Management Institute, vol. 18(4), pages 811-824, August.

    More about this item

    Keywords

    Financial Innovation; Money Demand; Co–integration with Structural Break; Stability;

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates

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