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Money, Stock Prices and Industrial Activity in India Long-Run Relationships and Causality

Author

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  • Prakash G. Apte

    (Indian Institute of Management, Bangalore)

Abstract

This paper investigates the role of stock prices in influencing demand for money in India using a multivariate cointegration analysis framework. While this relationship has been investigated earlier, no account was taken of the non-stationarity in the variables. The cointegration framework allows us to investigate the existence of one or more long run relationships between money, interest rate, industrial production and stock prices.Causality tests are also conducted with the cointegration framework which use an extended concept of Granger Causality. Tests with full sample and non-overelapping subsamples throw light on the possible structural shifts in the monetary process in India.

Suggested Citation

  • Prakash G. Apte, 1997. "Money, Stock Prices and Industrial Activity in India Long-Run Relationships and Causality," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 32(2), pages 179-198, July.
    • Handle: RePEc:dse:indecr:v:32:y:1997:i:2:p:179-198
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    Cited by:

    1. Isma Zaighum, 2014. "Impact of Macroeconomic Factors on Non-financial firms Stock Returns: Evidence from Sectorial Study of KSE-100 Index," Journal of Management Sciences, Geist Science, Iqra University, Faculty of Business Administration, vol. 1(1), pages 35-48, March.
    2. Muralikrishna Bharadwaj B. & Vishwanath Pandit, 2010. "Policy Reforms and Stability of the Money Demand Function in India," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 4(1), pages 25-47, January.

    More about this item

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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