Access

You are not currently logged in.

Access your personal account or get JSTOR access through your library or other institution:

login

Log in to your personal account or through your institution.

If You Use a Screen Reader

This content is available through Read Online (Free) program, which relies on page scans. Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.

Monetary Approach to Balance of Payments: A Case Study of India, 1968-85

R. Kannan
Economic and Political Weekly
Vol. 24, No. 12 (Mar. 25, 1989), pp. 627-633+635-636
Stable URL: http://www.jstor.org/stable/4394570
Page Count: 9
  • Read Online (Free)
  • Download ($9.00)
  • Subscribe ($19.50)
  • Cite this Item
Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.
Monetary Approach to Balance of Payments: A Case Study of India, 1968-85
Preview not available

Abstract

In this paper an attempt is made to test whether disequilibrium in the domestic money market exerts any influence on the balance of payments (BP). This has been done along the lines of 'monetary approach to the BP', as developed by Johnson [1972], Mundell [1968] and others. A comparison is made between elasticity approach and monetary approach in solving the BP problem. The reserve flow and sterilisation equations are estimated and the direction of causation between domestic credit and foreign exchange reserves is identified with Granger and Sims causality tests. The paper is divided into five sections. For the sake of completeness a brief outline of monetary approach to BP (MBOP) is given in Section I. Section II explains money demand equation, estimation of reserve flow and sterilisation equations. On the basis of money demand equation, monetary disequilibrium factor is worked out and the impact of this on trade, service and capital flows of the BP is tested in Section III. Dynamic simulation and the resultant multipliers are explained in Section IV followed by policy implications of this exercise in Section V.

Page Thumbnails

  • Thumbnail: Page 
627
    627
  • Thumbnail: Page 
628
    628
  • Thumbnail: Page 
629
    629
  • Thumbnail: Page 
630
    630
  • Thumbnail: Page 
631
    631
  • Thumbnail: Page 
632
    632
  • Thumbnail: Page 
633
    633
  • Thumbnail: Page 
635
    635
  • Thumbnail: Page 
636
    636