Estimation of Long-run Demand for Money, and its relation to Capital Markets: Revisited; and the Implications to Current Monetary Policy Issues of India and other countries

Estimation of Long-run Demand for Money, and its relation to Capital Markets: Revisited; and the Implications to Current Monetary Policy Issues of India and other countries | Research Square window.SnipcartSettings = { analytics: { enabled: false } }; (function() { var accessVector = localStorage.getItem('access_vector') || ''; window.dataLayer = window.dataLayer || []; if (accessVector) { window.dataLayer.push({ user: { profile: { profileInfo: { snid: accessVector } } } }); } })(); (function(w,d,s,l,i){w[l]=w[l]||[];w[l].push({'gtm.start':new Date().getTime(),event:'gtm.js'});var f=d.getElementsByTagName(s)[0],j=d.createElement(s),dl=l!='dataLayer'?'&l='+l:'';j.async=true;j.src='https://www.googletagmanager.com/gtm.js?id='+i+dl;f.parentNode.insertBefore(j,f);})(window,document,'script','dataLayer','GTM-K279D39R'); Browse Preprints In Review Journals COVID-19 Preprints AJE Video Bytes Research Tools Research Promotion AJE Professional Editing AJE Rubriq About Preprint Platform In Review Editorial Policies Our Team Advisory Board Help Center Sign In Submit a Preprint Cite Share Download PDF Research Article Estimation of Long-run Demand for Money, and its relation to Capital Markets: Revisited; and the Implications to Current Monetary Policy Issues of India and other countries Thomas Muthucattu Paul, Nagaraju Gotla, Jiji T Mathew This is a preprint; it has not been peer reviewed by a journal. https://doi.org/ 10.21203/rs.3.rs-6621531/v1 This work is licensed under a CC BY 4.0 License Status: Posted Version 1 posted You are reading this latest preprint version Abstract By employing the statistical tools, the cointegration analysis and the adjustment matrices, the Vector error Correction models, it is established that there is a statistically significant long-run demand function for real narrow money in India. The sign of the coefficient of the real stock prices is positive and statistically significant corroborating the wealth effect. Similarly, for the real broad money demand function, the statistical tests results corroborate existence of a long-run demand for broad money. But, unlike the demand for narrow money, the real stock prices have negative sign and statistically significant in the VECM vector, indicating a substitution effect of reducing the demand for broad money when real stock prices increase. Apart from the capital and money markets, and the real GDP, the foreign exchange markets also have a role in determining the real money demand .Therefore, the money has not withered away despite financial innovations, and the monetary aggregates should be again recognized as important monetary policy indicator variables in India and other developing countries .. E3(Prices Business fluctuations and Cycles) E4 (Money and Interest rates) E5 (Monetary Policy Central Banking and the Supply of Money and Credit) C1(Econometric methods) Full Text Additional Declarations The authors declare no competing interests. Cite Share Download PDF Status: Posted Version 1 posted You are reading this latest preprint version Research Square lets you share your work early, gain feedback from the community, and start making changes to your manuscript prior to peer review in a journal. As a division of Research Square Company, we’re committed to making research communication faster, fairer, and more useful. We do this by developing innovative software and high quality services for the global research community. Our growing team is made up of researchers and industry professionals working together to solve the most critical problems facing scientific publishing. Also discoverable on Platform About Our Team In Review Editorial Policies Advisory Board Help Center Resources Author Services Accessibility API Access RSS feed Manage Cookie Preferences © Research Square 2026 | ISSN 2693-5015 (online) Privacy Policy Terms of Service Do Not Sell My Personal Information {"props":{"pageProps":{"initialData":{"identity":"rs-6621531","acceptedTermsAndConditions":true,"allowDirectSubmit":true,"archivedVersions":[],"articleType":"Research Article","associatedPublications":[],"authors":[{"id":453859341,"identity":"930d3112-d39c-4a07-8e9b-553b23bf54c7","order_by":0,"name":"Thomas Muthucattu Paul","email":"data:image/png;base64,iVBORw0KGgoAAAANSUhEUgAAAZAAAAAyAQMAAABI0h/eAAAABlBMVEX///8AAABVwtN+AAAACXBIWXMAAA7EAAAOxAGVKw4bAAAA4UlEQVRIiWNgGAWjYDADPvmDjQ+ANA8fIZU8MAabBPNhA5AAGwla2NIkwAxCWuzZu1M38+6wS2yT7jGr/JpjJ8PGwPzw0Q18tvCc3Xab90xyYpvMGbPbstuSgQ5jMzbOwadFIheopY05sY0hx+y25DZmoBYeNmkitNSDtRRLbqsnWsvhxDaJtDTGj9sOE6HlzNltN+eeOW7cxnP4sDTjtuM8bMwE/MLe3rvtxtsd1bL97I2NH39uq7bnZ29++BifFhBg4m2AMJjBscRMQDkIMP6EamH8QYTqUTAKRsEoGHkAAFoHRo9qqkCpAAAAAElFTkSuQmCC","orcid":"","institution":"Papua New Guinea University of Technology, Former Professor of Economics and Finance","correspondingAuthor":true,"prefix":"","firstName":"Thomas","middleName":"Muthucattu","lastName":"Paul","suffix":""},{"id":453863533,"identity":"203a9bd5-821f-4ea4-aa8c-77dad2f64972","order_by":1,"name":"Nagaraju Gotla","email":"","orcid":"","institution":"National Institute of Bank management, Pune , India","correspondingAuthor":false,"prefix":"","firstName":"Nagaraju","middleName":"","lastName":"Gotla","suffix":""},{"id":453863896,"identity":"81043195-175e-4c6a-93cc-3b27e78bc7b6","order_by":2,"name":"Jiji T Mathew","email":"","orcid":"","institution":"National Institute of Bank Management , Pune, India","correspondingAuthor":false,"prefix":"","firstName":"Jiji","middleName":"T","lastName":"Mathew","suffix":""}],"badges":[],"createdAt":"2025-05-08 14:20:36","currentVersionCode":1,"declarations":{"humanSubjects":false,"vertebrateSubjects":false,"conflictsOfInterestStatement":false,"humanSubjectEthicalGuidelines":false,"humanSubjectConsent":false,"humanSubjectClinicalTrial":false,"humanSubjectCaseReport":false,"vertebrateSubjectEthicalGuidelines":false},"doi":"10.21203/rs.3.rs-6621531/v1","doiUrl":"https://doi.org/10.21203/rs.3.rs-6621531/v1","draftVersion":[],"editorialEvents":[],"editorialNote":"","failedWorkflow":false,"files":[{"id":82332503,"identity":"56b89bb0-d8d9-4831-be7b-75ee8de7b01d","added_by":"auto","created_at":"2025-05-09 07:34:23","extension":"pdf","order_by":1,"title":"","display":"","copyAsset":false,"role":"manuscript-pdf","size":514532,"visible":true,"origin":"","legend":"","description":"","filename":"ArticleonDemandforMoneysaved7thMayEmpE.pdf","url":"https://assets-eu.researchsquare.com/files/rs-6621531/v1_covered_fafc1c9f-b103-4fbb-8389-46392c8b3b3b.pdf"}],"financialInterests":"The authors declare no competing interests.","formattedTitle":"\u003cp\u003e\u003cstrong\u003eEstimation of Long-run Demand for Money, and its relation to Capital Markets: Revisited; and the Implications to Current Monetary Policy Issues of India and other countries\u003c/strong\u003e\u003c/p\u003e","fulltext":[],"fulltextSource":"","fullText":"","funders":[],"hasAdminPriorityOnWorkflow":false,"hasManuscriptDocX":false,"hasOptedInToPreprint":true,"hasPassedJournalQc":"","hasAnyPriority":true,"hideJournal":true,"highlight":"","institution":"National Institute of Bank Management","isAcceptedByJournal":false,"isAuthorSuppliedPdf":true,"isDeskRejected":"","isHiddenFromSearch":false,"isInQc":false,"isInWorkflow":false,"isPdf":true,"isPdfUpToDate":true,"isWithdrawnOrRetracted":false,"journal":{"display":true,"email":"[email protected]","identity":"researchsquare","isNatureJournal":false,"hasQc":true,"allowDirectSubmit":true,"externalIdentity":"","sideBox":"","snPcode":"","submissionUrl":"/submission","title":"Research Square","twitterHandle":"researchsquare","acdcEnabled":true,"dfaEnabled":false,"editorialSystem":"","reportingPortfolio":"","inReviewEnabled":false,"inReviewRevisionsEnabled":true},"keywords":"E3(Prices, Business fluctuations and Cycles), E4 (Money and Interest rates), E5 (Monetary Policy, Central Banking and the Supply of Money and Credit) C1(Econometric methods)","lastPublishedDoi":"10.21203/rs.3.rs-6621531/v1","lastPublishedDoiUrl":"https://doi.org/10.21203/rs.3.rs-6621531/v1","license":{"name":"CC BY 4.0","url":"https://creativecommons.org/licenses/by/4.0/"},"manuscriptAbstract":"\u003cp\u003eBy employing the statistical tools, the cointegration analysis and the adjustment matrices, the Vector error Correction models, it is established that there is a statistically significant long-run demand function for real narrow money in India. 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