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Causality between Monetary Expansion and the Price Level in India since 1950s – A Re-Examination

Author

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  • Ritwik Mazumder

    (Department of Economics, Assam University, Silchar, Assam 788011, India)

  • Sanjib Debnath

Abstract

This paper has tested short run causality between broad money supply and whole-sale price index (WPI) in India during 1951-2013 adopting a Toda-Yamamoto (1995) modified Granger causality approach under a VAR environment. Exponentially detrended annual time series data on broad money supply and the whole-sale price index are used for this purpose. Alternative tests for structural breaks reveal significant but dissimilar breaks in the variables. The empirical results are suggestive of a uni-directional causality from broad money supply to WPI. The study further finds that broad money supply and WPI in India have a long-run co-integrating relationship and short run causal relations could hence be expected.

Suggested Citation

  • Ritwik Mazumder & Sanjib Debnath, 2016. "Causality between Monetary Expansion and the Price Level in India since 1950s – A Re-Examination," Journal of Reviews on Global Economics, Lifescience Global, vol. 5, pages 154-164.
    • Handle: RePEc:lif:jrgelg:v:5:y:2016:p:154-164
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    File URL: http://www.lifescienceglobal.com/independent-journals/journal-of-reviews-on-global-economics/volume-5/85-abstract/jrge/2292-abstract-causality-between-monetary-expansion-and-the-price-level-in-india-since-1950s-a-re-examination
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    Cited by:

    1. Jelilov Gylych & Abdullahi Ahmad Jbrin & Bilal Celik & Abdurrahman Isik, 2020. "The Effect of Oil Price Fluctuation on the Economy of Nigeria," International Journal of Energy Economics and Policy, Econjournals, vol. 10(5), pages 461-468.

    More about this item

    Keywords

    Broad money supply; WPI; Modified Granger Causality; Toda-Yamamoto (1995) and VAR;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E59 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Other

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