Impact of supply of money on food prices in India: A causality analysis

Tiwari, Aviral (2010): Impact of supply of money on food prices in India: A causality analysis.

Abstract

This study attempts to investigate the direction of casualty between food prices and money supply in the static and dynamic framework. We found that narrow measure of money supply (M1) Granger causes food inflation while broad measure of money supply (M3) does not in the static framework. This implies that money supply (M1) is not neutral in determining food prices in the long run in the Indian context. From the dynamic framework of analysis we found that any one innovation in the broad measure of money supply (M3) will have positive impact on the food inflation for next three years.

• Item Type: MPRA Paper
• Language: English
• Keywords: Food Prices. Money Supply. Granger-causality
• Subjects: Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q1 - Agriculture > Q11 - Aggregate Supply and Demand Analysis ; Prices; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E51 - Money Supply ; Credit ; Money Multipliers; C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C31 - Cross-Sectional Models ; Spatial Models ; Treatment Effect Models ; Quantile Regressions ; Social Interaction Models

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