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Impact of supply of money on food prices in India: A causality analysis

  • Tiwari, Aviral

This study attempts to investigate the direction of casualty between food prices and money supply in the static and dynamic framework. We found that narrow measure of money supply (M1) Granger causes food inflation while broad measure of money supply (M3) does not in the static framework. This implies that money supply (M1) is not neutral in determining food prices in the long run in the Indian context. From the dynamic framework of analysis we found that any one innovation in the broad measure of money supply (M3) will have positive impact on the food inflation for next three years.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 24679.

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Date of creation: 09 Jun 2010
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Handle: RePEc:pra:mprapa:24679
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  1. S. Devadoss & William H. Meyers, 1987. "Relative Prices and Money: Further Results for the United States," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 69(4), pages 838-842.
  2. James G. MacKinnon, 1995. "Numerical Distribution Functions for Unit Root and Cointegration Tests," Working Papers 918, Queen's University, Department of Economics.
  3. James G. MacKinnon & Alfred A. Haug & Leo Michelis, 1996. "Numerical Distribution Functions of Likelihood Ratio Tests for Cointegration," Working Papers 1996_07, York University, Department of Economics.
  4. Gonzalo, Jesus, 1994. "Five alternative methods of estimating long-run equilibrium relationships," Journal of Econometrics, Elsevier, vol. 60(1-2), pages 203-233.
  5. Devadoss, Stephen & Meyers, William H., 1987. "Relative Prices and Money: Further Results for the United States," Staff General Research Papers 10856, Iowa State University, Department of Economics.
  6. David A. Bessler, 1984. "Relative Prices and Money: A Vector Autoregression on Brazilian Data," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 66(1), pages 25-30.
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