Modeling the dynamics of money income from a vector correction model

Mohammad S. Hasan ()
Additional contact information
Mohammad S. Hasan: King Fahd University of Petroleum and Minerals, Saudi Arabia

Journal of Developing Areas, 2010, vol. 43, issue 2, 233-253

Abstract: The purpose of this paper is to re-examine the empirical relationship among alternative monetary aggregates (M1 and M2), output, prices, interest rates and exchange rates in India. The results of a five-variate vector error correction model are indicative of a bi-directional causality between each of the monetary aggregates and prices. Our findings of a feedback relationship make each of the monetary aggregates a poor intermediate target and informational variable. Moreover, contrary to most recent research in this area, the results are supportive of the real business-cycle view and the Keynesian monetary accommodation hypothesis rather than the monetarists’ theory of the business cycle.

Keywords: Money-Income Relationship; Real Business Cycle Theory; Keynesian Monetary Accommodation Hypothesis; Vector Error correction Model; Variance Decompositions (search for similar items in EconPapers)
JEL-codes: C32 E30 O11 (search for similar items in EconPapers)
Date: 2010
References: Add references at CitEc
Citations:

Downloads: (external link)
http://muse.jhu.edu/journals/journal_of_developing_areas/v043/43.2.hasan.html

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:jda:journl:vol.43:year:2010:issue2:pp:233-253

Access Statistics for this article

More articles in Journal of Developing Areas from Tennessee State University, College of Business Contact information at EDIRC.
Bibliographic data for series maintained by Abu N.M. Wahid ().