Money, Stock Prices and Industrial Activity in India Long-Run Relationships and Causality

Prakash G. Apte
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Prakash G. Apte: Indian Institute of Management, Bangalore

Indian Economic Review, 1997, vol. 32, issue 2, 179-198

Abstract: This paper investigates the role of stock prices in influencing demand for money in India using a multivariate cointegration analysis framework. While this relationship has been investigated earlier, no account was taken of the non-stationarity in the variables. The cointegration framework allows us to investigate the existence of one or more long run relationships between money, interest rate, industrial production and stock prices.Causality tests are also conducted with the cointegration framework which use an extended concept of Granger Causality. Tests with full sample and non-overelapping subsamples throw light on the possible structural shifts in the monetary process in India.

JEL-codes: E44 (search for similar items in EconPapers)
Date: 1997
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