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Publication Details
AFRICAN RESEARCH NEXUS
SHINING A SPOTLIGHT ON AFRICAN RESEARCH
economics, econometrics and finance
Dynamics of money, output and price interaction - Some Indian evidence
Economic Modelling, Volume 17, No. 4, Year 2000
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Description
The present study is an attempt to model the dynamic interactions between money, output and prices in a structural vector autoregression framework. The primary concern of the paper is to examine the sources of variations and response of one variable to changes in others in a system of economic variables in the Indian context. Using quarterly data from 1970Q1 to 1990Q4, we find that structural factors, in addition to monetary factors, play an important role in generating and sustaining the process of inflation and fluctuations in economic activity. An increase in money/credit supply is found to increase output and prices in the short-run and prices in the long-run, while a non-accommodating monetary policy is ineffective in controlling inflation even at the cost of substantial output losses, thereby indicating relative rigidities in price movements. Another interesting finding is that the monetary authority responds differently to different price shocks, exercising its leverage in altering the quantity as well as the composition of aggregate money supply. Our findings also indicate that the economy is characterized by relatively large and infrequent shocks to 'price/cost'-related factors. Finally, our analysis suggests that a simple monetary targeting without adequate 'supply side' measures may not be able to serve the objective of maintaining growth with price stability. © 2000 Elsevier Science B.V. All rights reserved.
Authors & Co-Authors
Roy, Sudipta Dutta
India, Mumbai
Indira Gandhi Institute of Development Research
Darbha, Gangadhar
India, Mumbai
Indira Gandhi Institute of Development Research
South Africa, Pretoria
University of Pretoria
Statistics
Citations: 23
Authors: 2
Affiliations: 2
Identifiers
Doi:
10.1016/s0264-9993(99)00039-5
ISSN:
02649993
Research Areas
Health System And Policy