EconPapers    
Economics at your fingertips  
 

The Money Supply Process in India: Identification, Analysis and Estimation

Ashima Goyal and Shridhar Dash

MPRA Paper from University Library of Munich, Germany

Abstract: A new specification is employed to test for the degree of endogeneity of commercial bank credit, and its response to structural variables relevant to the Indian context. Our specification allows us to both identify money supply in a single equation, and disentangle the contribution of the Central and the Commercial Banks to the money supply process. Bank credit reacted more to financial variables and had dissimilar responses to food and manufacturing prices and output. Instead of interest rates, sectoral returns played a major role. Monetary policy broadly succeeded in preventing an explosive growth in money supply and reined in inflationary expectations. But by targeting manufacturing prices it harmed real output. The estimated structure implies that it would be more efficient to target agricultural prices for inflation control. A monetary contraction should be completed earlier than in the past, and should coincide with a rise in food prices. Information available in the systematic structural features can be exploited in designing monetary policy.

Keywords: Money supply endogeneity; identification; information; sectoral prices (search for similar items in EconPapers)
JEL-codes: C22 E51 O11 (search for similar items in EconPapers)
Date: 2000-07
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Published in Indian Economic Journal 1.48(2000): pp. 90 -102

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/24632/1/MPRA_paper_24632.pdf original version (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:pra:mprapa:24632

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().

 
Page updated 2025-03-19
Handle: RePEc:pra:mprapa:24632