Economic sectoral bias in the macro-money demand function for India: some evidence

Article type: Research Article

Authors: Ganti, Subrahmanyam^{a; *}

Affiliations: [a] SUNY, Department of Economics, 415 Fronczak Hali, Box 601520 Buffalo, NY 14260-1520, USA

Correspondence: [*] The author is currently a visiting Professor in Economics at SUNY, Buffalo, on leave from the National Institute of Bank Management, Pune, India where he has been a Senior Professor of Money and International Finance.

Abstract: The objective of this paper is first to derive theoretically and then test empirically for the existence of differential propensities to demand for money across sectors by industry of origin in a developing economy. The econometric evidence for the Indian economy on the agriculture (commodity) and nonagriculture (services) sectors for a little over a four decade period is convincing. The presence of sectoral bias in the money demand function is clearly indicated for India over the period 1950/51–1991/92 implying thereby that monetary planning based on the standard macro-money demand specifications for India may produce misleading results.

DOI: 10.3233/JEM-1996-22401

Journal: Journal of Economic and Social Measurement, vol. 22, no. 4, pp. 219-230, 1996