Revisiting Money Demand Stability in India: Some Post-reform Evidence (1996–2016). Issue 3 (December 2018)

• Record Type: Journal Article
• Authors: Adil, Masudul Hasan; Haider, Salman; Hatekar, Neeraj R.
• Is Part Of: Indian economic journal. Volume 66:Issue 3/4(2019)
• Page Start: 326
• Page End: 346
• Publication Date: 2018-12
• Subjects: Economic reform -- money demand -- inflation targeting -- autoregressive distributed lag -- India; Economics -- Periodicals; India -- Economic conditions -- Periodicals; Economics; Economic history; India; Periodicals; 330.5
• DOI: 10.1177/0019466220938930
• Languages: English
• ISSNs: 0019-4662

Abstract

In the evidence of the globalised world economy and changing economic structure, the traditional policies require a close examination. This is particularly true in the case of emerging economies like India, which have experienced a rapidly changing policy environment since 1991. The demand for money is an important ingredient for monetary policy formulation. Therefore, the present study re-examines the stability and specification issues of money demand in India's post-reform era. The study takes care of structural breaks in the macroeconomic series while using a unique quarterly dataset from 1996: Q2 to 2016: Q3. Despite the structural breaks, the application ofGregory and Hansen (1996) and autoregressive distributed lag models demonstrate the existence of a stable short-and long-run relationships between real money balances and their determinants. These empirical findings are having a lot of policy implications in the current monetary policy framework of India—inflation targeting framework.