The vanishing role of money in the macroeconomy: An Empirical investigation based on spectral and wavelet analysis

D.M. Nachane () and Amlendu Kumar Dubey
Additional contact information
D.M. Nachane: Indira Gandhi Institute of Development Research
Amlendu Kumar Dubey: Indira Gandhi Institute of Development Research

Indira Gandhi Institute of Development Research, Mumbai Working Papers from Indira Gandhi Institute of Development Research, Mumbai, India

Abstract: The recent de-emphasizing of the role of "money" in both theoretical macroeconomics as well as in the practical conduct of monetary policy sits uneasily with the idea that inflation is a monetary phenomenon. Empirical evidence has, however, been accumulating, pointing to an important leading indicator role for money and credit aggregates with respect to long term inflationary trends. Such a role could arise from monetary aggregates furnishing a nominal anchor for inflationary expectations, from their influence on the term structure of interest rates and from their affecting transactions costs in markets. Our paper attempts to assess the informational content role of money in the Indian economy by a separation of these effects across time scales and frequency bands, using the techniques of wavelet analysis and band spectral analysis respectively. Our results indicate variability of causal relations across frequency ranges and time scales, as also occasional causal reversals.

Keywords: money; inflation; cointegration; causality; decomposition; band spectra; wavelets (search for similar items in EconPapers)
JEL-codes: C32 E51 E52 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2008-10
New Economics Papers: this item is included in nep-cba, nep-cwa, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.igidr.ac.in/pdf/publication/WP-2008-022.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ind:igiwpp:2008-022

Access Statistics for this paper

More papers in Indira Gandhi Institute of Development Research, Mumbai Working Papers from Indira Gandhi Institute of Development Research, Mumbai, India Contact information at EDIRC.
Bibliographic data for series maintained by Shamprasad M. Pujar ().