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The Macroeconomic Reform and the Demand for Money in India


  • Rangan Gupta

    () (Department of Economics, University of Pretoria)

  • Basab Dasgupta


The paper is an attempt to estimate the short-run and long-run money demand functions in India for the decade of the ninety. The paper tries to closely follow the methodologies laid down in Chow (1966), Hendry (1980), Rose (1985) and Hwang (1985). The main findings of the paper are: (i) permanent income is not an appropriate epresentation of the scale variable, (ii) the positive interest elasticity of demand for money in the short-run (iii) limited ability of economic agents in removing disequilibrium of past period and (iv) rejection of the real adjustment hypothesis.

Suggested Citation

  • Rangan Gupta & Basab Dasgupta, 2005. "The Macroeconomic Reform and the Demand for Money in India," Working Papers 200502, University of Pretoria, Department of Economics.
  • Handle: RePEc:pre:wpaper:200502

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    References listed on IDEAS

    1. Makinen, Gail E & Woodward, G Thomas, 1989. "The Taiwanese Hyperinflation and Stabilization of 1945-1952," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 21(1), pages 90-105, February.
    2. Sargent, Thomas J & Wallace, Neil, 1973. "Rational Expectations and the Dynamics of Hyperinflation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 14(2), pages 328-350, June.
    3. Makinen, Gail E, 1984. "The Greek Stabilization of 1944-46," American Economic Review, American Economic Association, vol. 74(5), pages 1067-1074, December.
    4. Makinen, Gail E., 1986. "The Greek Hyperinflation and Stabilization of 1943–1946," The Journal of Economic History, Cambridge University Press, vol. 46(03), pages 795-805, September.
    5. Bomberger, William A & Makinen, Gail E, 1983. "The Hungarian Hyperinflation and Stabilization of 1945-1946," Journal of Political Economy, University of Chicago Press, vol. 91(5), pages 801-824, October.
    6. Babcock, J M & Makinen, G E, 1975. "The Chinese Hyperinflation Reexamined," Journal of Political Economy, University of Chicago Press, vol. 83(6), pages 1259-1267, December.
    7. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-438, July.
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    Cited by:

    1. Nitin, Arora & Asghar, OsatiEraghi, 2016. "Does India have a stable demand for money function after reforms? A macroeconometric analysis," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 44, pages 25-37.
    2. Olomola, Aderbigbe & Gyimah-Brempong, Kwabena, 2014. "Loan demand and rationing among small-scale farmers in Nigeria:," IFPRI discussion papers 1403, International Food Policy Research Institute (IFPRI).

    More about this item


    Demand for Money; Error Correction Models; Partial Adjustment Models;

    JEL classification:

    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes


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