Causality between Monetary Expansion and the Price Level in India since 1950s - A Re-Examination

Authors

  • Sanjib Debnath Department of Economics, Assam University
  • Ritwik Mazumder Department of Economics, Assam University

Keywords:

Broad money supply, WPI, Modified Granger Causality, Toda-Yamamoto (1995) and VAR

Abstract

This paper has tested short run causality between broad money supply and whole-sale price index (WPI) in India during 1951-2013 adopting a Toda-Yamamoto (1995) modified Granger causality approach under a VAR environment. Exponentially detrended annual time series data on broad money supply and the whole-sale price index are used for this purpose. Alternative tests for structural breaks reveal significant but dissimilar breaks in the variables. The empirical results are suggestive of a uni-directional causality from broad money supply to WPI. The study further finds that broad money supply and WPI in India have a long-run co-integrating relationship and short run causal relations could hence be expected.

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Published

2016-05-11

How to Cite

Debnath, S., & Mazumder, R. (2016). Causality between Monetary Expansion and the Price Level in India since 1950s - A Re-Examination. Journal of Reviews on Global Economics, 5, 154–164. Retrieved from http://lifescienceglobalca.com/index.php/jrge/article/view/3908

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