IDEAS home Printed from https://ideas.repec.org/a/icf/icfjae/v10y2011i2p40-56.html
   My bibliography  Save this article

Causal Relation Between Money Supply and Exchange Rate in India Under the Basket Peg and Market Determination Regimes: A Time Series Analysis

Author

Listed:
  • Biswajit Maitra
  • Chandan Kumar Mukhopadhyay

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.

Suggested Citation

  • Biswajit Maitra & Chandan Kumar Mukhopadhyay, 2011. "Causal Relation Between Money Supply and Exchange Rate in India Under the Basket Peg and Market Determination Regimes: A Time Series Analysis," The IUP Journal of Applied Economics, IUP Publications, vol. 0(2), pages 40-56, April.
  • Handle: RePEc:icf:icfjae:v:10:y:2011:i:2:p:40-56
    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.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Biswajit Maitra, 2016. "Monetary, Real Shocks And Exchange Rate Variations In India," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 41(1), pages 81-103, March.

    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:10:y:2011:i:2:p:40-56. 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.