Volume : I, Issue : XII, September - 2012

Causal Relationship Between Money, Income And Prices A Case Study Of Indian Economy During 1990–2010

Dr. S. A. Saiyed

Abstract :

This paper attempts to investigate empirically the causal relationship between Money Supply (M3, Broad Money), Income/ Output (GNP) and Prices using annual data for Indian Economy over the period 1990–91 to 2010–11 with the help of Statistical Regression Models..Regression Analysis shows that Money Stock expansion has influenced both Income/Output and Prices. The tests also indicate changes in Money Supply have an impact on Income/Output and Prices also. The causality tests also show bidirectional causation that Money Stock causes Income/Output and also Income/Output causes Money Supply. Moreover tests indicate unidirectional causality among from Money Supply to Prices .These results are confirmed through the Granger (1969) causality test. We conclude that there is an evidence for Money–Income–Prices Causal Relationship. The empirical results indicate that Money Supply do Ganger causes Income/Output and Income/Output also do Granger causes Money Supply and Money Supply causes Prices in the Indian economy.

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Article: Download PDF   DOI : 10.36106/ijar  

Cite This Article:

Dr. S.A. Saiyed Causal Relationship Between Money, Income And Prices A Case Study Of Indian Economy During 1990-2010 Indian Journal of Applied Research, Vol.I, Issue.XII September 2012

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