On the Endogeneity of the Money Multiplier in India
Raghbendra Jha and
Deba Prasad Rath
Departmental Working Papers from The Australian National University, Arndt-Corden Department of Economics
Abstract:
Citing a break in the statistical association between the broader money aggregates and reserve money in the the post-reforms period of the 1990s vis-a-vis the 1980s, this paper argues that an endogenous money multiplier framework is best suited for analyzing the money supply process in India and questions the simplifying assumptions tending to justify stability and predictability of the money multiplier especially in the context of a deregulated financial system with market determined interest rates. An empirical analysis conducted using monthly data for the period April 1980 through March 2000 establishes this and traces the source of the endogeneity of these multipliers to a range of macroeconomic variables.
Pages: 54 pages
Date: 2001
New Economics Papers: this item is included in nep-mac and nep-mon
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