ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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

A Case Study of India, 1968-85 R Kannan 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.

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