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Determination of Money Supply in India: The Great Debate

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  • Das, Rituparna

Abstract

Researchers reported that - there were two approaches to money supply determination in India: balance sheet or structural approach and money multiplier approach; the former focused on individual items in the balance sheet of the consolidated monetary sector in order to explain changes in money supply and the latter focused on the relationship between money stock and reserve money; the money multiplier approach emerged strongly as a critic to the balance sheet approach; between January 1976 and January 1978 there was a hot and rich debate between two groups of researchers, one group led by Gupta who believed in the money multiplier theory, the other group of RBI economists, who were not accepting this theory; the debate gave rise to a number of research papers where mostly regression techniques were used to estimate and forecast money supply function; Bhattacharya (1972), Gupta (1972) and Marwah (1972) used regression techniques to estimate money multiplier in India four years before the debate took place. The above debate is narrated below in an analytical style.

Suggested Citation

  • Das, Rituparna, 2010. "Determination of Money Supply in India: The Great Debate," MPRA Paper 22858, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:22858
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    File URL: https://mpra.ub.uni-muenchen.de/22858/1/MPRA_paper_22858.pdf
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    References listed on IDEAS

    as
    1. Das, Rituparna, 2009. "Endogenous Money, Output and Prices in India," MPRA Paper 14252, University Library of Munich, Germany.
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    More about this item

    Keywords

    money supply; high powered money; reserve money; RBI; Working Group; multiplier; balance sheet; forecast; currency;

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates

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