The Dynamics and Determinant of Money Demand in India: An Econometric Analysis

Le résumé fourni par la source

The present study tries to examine the key factors that determine money demand in India over the period from 1996 to 2020. The Auto-Regressive Distributed Lag model is applied to capture both short-run and long-run dynamics. The long run results show that income, interest rate, and foreign exchange reserves have a significant impact on money demand, while the exchange rate appears statistically insignificant. The error correction term indicates that short-run disequilibrium adjusts toward equilibrium at a rate of 32 percent annually. Overall, the findings show the importance of broad money (M3) as a useful indicator to assess output gaps and inflation expectations, and highlight its role in the formulation of India’s inflation-targeted monetary policy.

Ce résumé expose les affirmations des auteurs. BNTIC ne l’interprète pas comme une validation indépendante des résultats.