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Financial Innovation and Stability of Money Demand Function in Post–reform period in India

Author

Listed:
  • Prakash Singh

    (Institute of Economic Growth)

  • Manoj Kumar Pandey

    (Australia South Asia Research Center, Australian National University, Canberra)

Abstract

Innovation in financial sector, financial reforms and changes in the policy environment are the factors responsible for instability in the money demanded in an economy. The dawn of 1991 balance of payment crisis in India brought much needed reforms in the economy and financial sector and triggered financial innovation fueled with revolution in information technology world wide and in India. In this backdrop this paper attempts to take a meticulous look on stability of money demand in India with quarterly data for 1996–97:1–2009–10:3 period. Based on Gregory–Hansen (1996) method of co–integration estimation the analysis confirms that in contrast to most of the previous studies, money demand function in India is not stable in the post reform period.

Suggested Citation

  • Prakash Singh & Manoj Kumar Pandey, 2010. "Financial Innovation and Stability of Money Demand Function in Post–reform period in India," Economics Bulletin, AccessEcon, vol. 30(4), pages 2895-2905.
    • Handle: RePEc:ebl:ecbull:eb-10-00336
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    File URL: http://www.accessecon.com/Pubs/EB/2010/Volume30/EB-10-V30-I4-P266.pdf
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    Citations

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    Cited by:

    1. Adil, Masudul Hasan & Haider, Salman & Hatekar, Neeraj, 2018. "The empirical verification of money demand in case of India: Post-reform era," MPRA Paper 87148, University Library of Munich, Germany, revised 07 Jun 2018.
    2. S. M. Woahid Murad & Ruhul Salim & Md. Golam Kibria, 2021. "Asymmetric Effects of Economic Policy Uncertainty on the Demand for Money in India," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 19(3), pages 451-470, September.
    3. Nitin, Arora & Asghar, OsatiEraghi, 2016. "Does India have a stable demand for money function after reforms? A macroeconometric analysis," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 44, pages 25-37.
    4. Muhammad Ahad, 2017. "Financial Development and Money Demand Function: Cointegration, Causality and Variance Decomposition Analysis for Pakistan," Global Business Review, International Management Institute, vol. 18(4), pages 811-824, August.
    5. Masudul Hasan Adil & Salman Haider & Neeraj R. Hatekar, 2020. "Empirical Assessment of Money Demand Stability Under India’s Open Economy: Non-linear ARDL Approach," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 18(4), pages 891-909, December.
    6. Masudul Hasan Adil & Neeraj Hatekar & Pravakar Sahoo, 2020. "The Impact of Financial Innovation on the Money Demand Function: An Empirical Verification in India," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 14(1), pages 28-61, February.

    More about this item

    Keywords

    Financial Innovation; Money Demand; Co–integration with Structural Break; Stability;
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates

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