Variations in Prices due to Anticipated and Unanticipated Money
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Keywords

Anticipated Money, Unanticipated Money, Cointegration, Causality, Rational Expectations

How to Cite

Maitra, B. ., & Mukhopadhyay, C. K. (2012). Variations in Prices due to Anticipated and Unanticipated Money. Asian Economic and Financial Review, 2(1), 76–87. Retrieved from https://archive.aessweb.com/index.php/5002/article/view/738

Abstract

The relation between money and price has unique relevance in price stability. Rational expectations theorists hold that both anticipated and unanticipated money supply affect price level. This paper addresses this issue and enquires if anticipated and unanticipated money supplies have any role in the variations in whole sale and consumer prices (WPI & CPI) in India over the period 1992:Q1 to 2010:Q3. It is found that both anticipated and unanticipated money supply shocks cause rise in WPI and CPI inflation and justifying the rational expectations proposition. Price level, therefore, can be stabilized through appropriate monetary management.

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