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On the Endogeneity of the Money Multiplier in India

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  • Raghbendra Jha
  • Deba Prasad Rath

Abstract

Citing a break in the statistical association between the broader money aggregates and reserve money in the the post-reforms period of the 1990s vis-a-vis the 1980s, this paper argues that an endogenous money multiplier framework is best suited for analyzing the money supply process in India and questions the simplifying assumptions tending to justify stability and predictability of the money multiplier especially in the context of a deregulated financial system with market determined interest rates. An empirical analysis conducted using monthly data for the period April 1980 through March 2000 establishes this and traces the source of the endogeneity of these multipliers to a range of macroeconomic variables.

Suggested Citation

  • Raghbendra Jha & Deba Prasad Rath, 2001. "On the Endogeneity of the Money Multiplier in India," ASARC Working Papers 2001-12, The Australian National University, Australia South Asia Research Centre.
    • Handle: RePEc:pas:asarcc:2001-12
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    References listed on IDEAS

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    3. Gauger, Jean, 1998. "Economic Impacts on the Money Supply Process," Journal of Macroeconomics, Elsevier, vol. 20(3), pages 553-577, July.
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    Cited by:

    1. Alice Ouyang & Ramkishen Rajan & Tom Willett, 2008. "Managing the Monetary Consequences of Reserve Accumulation in Emerging Asia," Global Economic Review, Taylor & Francis Journals, vol. 37(2), pages 171-199.
    2. Ouyang, Alice Y. & Rajan, Ramkishen S. & Willett, Thomas D., 2010. "China as a reserve sink: The evidence from offset and sterilization coefficients," Journal of International Money and Finance, Elsevier, vol. 29(5), pages 951-972, September.
    3. Ho Dong Ching, 2011. "Endogenous Money - A Structural Model of Monetary Base," Occasional Papers, South East Asian Central Banks (SEACEN) Research and Training Centre, number occ52.
    4. Akhand Akhtar Hossain, 2015. "Economic Management in a Volatile Environment: Monetary and Financial Issues by Ramkishen S. Rajan and Sasidaran Gopalan Palgrave Macmillan , London , 2015 Pp. xx+283. ISBN 9 78 137 37151-5," Asian-Pacific Economic Literature, The Crawford School, The Australian National University, vol. 29(2), pages 103-106, November.

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