Response of Money Stock to its Demand
Published: 2009
Author(s) Name: Manish Sinha
Locked
Subscribed
Available for All
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
View PDF