Asymmetric Effects of Economic Policy Uncertainty on the Demand for Money in India

S. M. Woahid Murad (), Ruhul Salim and Md. Golam Kibria
Additional contact information
Md. Golam Kibria: Noakhali Science and Technology University

Journal of Quantitative Economics, 2021, vol. 19, issue 3, No 3, 470 pages

Abstract: Abstract This study aims to extend the conventional money demand function by including the economic policy uncertainty (EPU) index in the Indian money demand function. The rest of the determinants are income, interest rate, inflation rate, and exchange rate. Both symmetric and asymmetric effects of uncertainty are estimated covering the period 2003M1–2018M4. The linear ARDL bounds testing approach shows that uncertainty has a significant effect on narrow money in the short run. At the same time, the asymmetric nonlinear framework supports the short-run asymmetric effect of uncertainty on both narrow and broad money. More precisely, the policy uncertainty is a short-run phenomenon for the Indian money demand function. However, both linear and nonlinear models yield a stable demand for money in India regardless of narrow money or broad money. Hence, the monetary policy can be initiated to tune the Indian economy.

Keywords: Money demand; Policy uncertainty; Nonlinear ARDL; ARDL bounds test; India (search for similar items in EconPapers)
JEL-codes: C22 C54 E41 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
http://link.springer.com/10.1007/s40953-021-00235-1 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

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:spr:jqecon:v:19:y:2021:i:3:d:10.1007_s40953-021-00235-1

Ordering information: This journal article can be ordered from
http://www.springer.com/economics/journal/40953

DOI: 10.1007/s40953-021-00235-1

Access Statistics for this article

Journal of Quantitative Economics is currently edited by Dilip Nachane and P.G. Babu

More articles in Journal of Quantitative Economics from Springer, The Indian Econometric Society (TIES) Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().