Abstract
Using Granger causality the authors examine the question of the exogeniety of money in India during its period of most rapid monetization (1970–1975). The paper finds that the demand for money function with the narrow stock of money can be estimated but not with the broad stock of money. There is evidence of feedback between M 2 , monetized income and the rate of interest. An explanation along the lines of Patrick's analysis of supply led financial development is advanced to show the influence of M 2 on income and the rate of interest.
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