The PDF file you selected should load here if your Web browser has a PDF reader plug-in installed (for example, a recent version of Adobe Acrobat Reader).

If you would like more information about how to print, save, and work with PDFs, Highwire Press provides a helpful Frequently Asked Questions about PDFs.

Alternatively, you can download the PDF file directly to your computer, from where it can be opened using a PDF reader. To download the PDF, click the Download link above.

Fullscreen Fullscreen Off

   Subscribe/Renew Journal


The relationship between money supply, income and prices is still a contentious concern mostly between the Keynesians and Monetarists. The Keynesians emphasise that a change in income reflects changes in money through demand for money, which means that there exists a unidirectional causality from income to money without any criticism. The Monetarists claim that money is the most important cause leading to changes in income and prices. Therefore, the direction of causation runs from money to income and prices without any feedback. This article studies the association between these macroeconomic aggregates using time series method of pair wise Granger causality test on annual data of the Indian economy over the period 1950-51 to 2012-13. Lag length is favoured by using standard criteria through VAR estimation. The Monetarists view is strongly supported by the result of this study. It is understood from the paper that the monetary policy has a force on the Indian macroeconomic variables as there is a casual relationship between money supply to inflation and income. Nevertheless, these relationships of variables are sensitive to lag length selections.

Keywords

Pair Wise Granger Causality, VAR Lag Order Selection Criteria, Augmented Dickey Fuller (ADF) Test, Phillips-Perron (PP) Test.
Subscription Login to verify subscription
User
Notifications
Font Size