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Erschienen in:
Core Inflation Dynamics and Impact of Demand and Supply Shocks: Evidence from India Kapitel lesen Erstes Kapitel lesen

2018 | OriginalPaper | Buchkapitel

2. Demand for Money in India: An ARDL Approach

verfasst von : Abdul Rishad, Akhil Sharma, Sanjeev Gupta

Erschienen in: Current Issues in the Economy and Finance of India

Verlag: Springer International Publishing

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Abstract

Understanding the stability of monetary aggregates and different determinants of money demand in an economy is necessary for the planning and implementation of monetary policy because of the sensitivity and importance of money in an economy. This study empirically examines the broad money (M3) money demand function in Indian economy by using a robust Autoregressive Distributed Lag (ARDL) model suggested by Pesaran et al. (J Appl Econom 16:289–326, 2001). It uses annual data on GDP per-capita, exchange rate and inflation for a period of 41 years from 1975 onwards. The study found a strong co-integration relation between M3 and its determinants for long-run but only the inflation was co-integrated for short-run. It further found that the GDP elasticity & inflation elasticity of money was positive and the elasticity of exchange rate is negative. The result of CUSUM and CUSUMQ confirm a stable money demand in Indian economy and using M3 as the policy yardstick is effective for monetary policy decisions.

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Vorheriges Kapitel Core Inflation Dynamics and Impact of Demand and Supply Shocks: Evidence from India
Nächstes Kapitel Some Empirical Evidence on the Effects of Monetary Policy in India: A Vector Autoregressive Based Analysis
Fußnoten
1
The log-linear specification provides the efficient results as compared to simple specification (Layson 1983; Shahbaz 2010)
 
2
Narayan (2004) and Pesaran and Shin (1999) argued that the SBC-based ARDL model performs better than the AIC-based model in case of small samples.
 
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Metadaten
Titel
Demand for Money in India: An ARDL Approach
verfasst von
Abdul Rishad
Akhil Sharma
Sanjeev Gupta
Copyright-Jahr
2018
Buch
Current Issues in the Economy and Finance of India

Print ISBN: 978-3-319-99554-0

Electronic ISBN: 978-3-319-99555-7

Copyright-Jahr: 2018

DOI
https://doi.org/10.1007/978-3-319-99555-7_2

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