IDEAS home Printed from https://ideas.repec.org/a/icf/icfjae/v05y2006i1p69-79.html
   My bibliography  Save this article

Money, Output And Prices In India During 1970-2002: A Macroeconometric Analysis

Author

Listed:
  • Prof. Maniklal Adhikary
  • Ritwik Mazumder

Abstract

This paper estimates both the long run and the short run money demand functions in India over the period 1970-71 to 2002-03 on the basis of appropriate macroeconomic data. A partial stock adjustment principle is used to frame a short run money demand function. The estimated long run as well as short run money demand functions reveal that transaction motive is stronger than the assets motive for holding money. The long run estimates show further that the Indian macro economy does not suffer from money illusion. Second, the inflationary impact of monetary expansion is estimated econometrically. Long run evidence shows that monetary expansion is inflationary, the impact being felt for over a year. Recent experience however reveals that the inflationary impact is felt over a quarter. Third, it examines the relative effectiveness of fiscal policy compared to monetary policy, employing the St. Louis model. Both the non-nested and nested forms of the St. Louis equation support the superiority of narrow money supply over government expenditure in explaining GDP growth. But the Granger causality shows that the causation from GDP to M1 is more pronounced compared to its contrary thereby establishing the transactions motive for holding money. The strong causation from money to prices is also evident from the test of causality.

Suggested Citation

  • Prof. Maniklal Adhikary & Ritwik Mazumder, 2006. "Money, Output And Prices In India During 1970-2002: A Macroeconometric Analysis," The IUP Journal of Applied Economics, IUP Publications, vol. 0(1), pages 69-79, January.
  • Handle: RePEc:icf:icfjae:v:05:y:2006:i:1:p:69-79
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below 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.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:icf:icfjae:v:05:y:2006:i:1:p:69-79. See general 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). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.