Monetary policy and output growth in indian economy - A time series econometric study

This paper examines whether money monetary policy has any role in the variations in output growth in Indian economy from 1985 to 2007. The VEC model testifies that long-run relationship that output growth maintained with money supply is unstable. The shocks, transmitted through output growth channel, have significant impact on the long-run relationship and these provide explosive oscillations. The VAR model confirms that there exists bi-directional Granger causality between output growth and money supply growth. The intervention analysis testifies for the persistence of the successful operations of monetary policy particularly in generating appropriate variations in output level in India over the period of the study.