Drishtikon: A Management Journal

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Response of Money Stock to its Demand


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1 Symbiosis Centre for Management and Human Resource Development, Pune-411057,, India
     

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It is interesting to find out as to what is the position of supply of money in India as compared to its demand. Some believe that our supply of money is more than the demand for it and that explains the persistent inflation in the economy. The demand for money is modeled based on the Keynesian theory of demand for money where it is based on national income and interest rate. The money stock data of broad money (M3) has been taken for the years 1996 to 2005. The Keynesian model of demand for money tells us that RBI has been conservative in its money supply as the same is systematically lesser than the desired demand for money.

Keywords

Keynes’ Theory of Money Supply, Real Income, Interest Rate
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  • Response of Money Stock to its Demand

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Authors

Manish Sinha
Symbiosis Centre for Management and Human Resource Development, Pune-411057,, India

Abstract


It is interesting to find out as to what is the position of supply of money in India as compared to its demand. Some believe that our supply of money is more than the demand for it and that explains the persistent inflation in the economy. The demand for money is modeled based on the Keynesian theory of demand for money where it is based on national income and interest rate. The money stock data of broad money (M3) has been taken for the years 1996 to 2005. The Keynesian model of demand for money tells us that RBI has been conservative in its money supply as the same is systematically lesser than the desired demand for money.

Keywords


Keynes’ Theory of Money Supply, Real Income, Interest Rate

References