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EstimatingDemand for Money in India during 1991–2011 Dr. Havaldar Deepak*,* *Associate Professor, Amity University, Mumbai *. deepakhavaldar@rediffmail.com
Abstract In this paper the effects of real NDP at factor cost and interest rate on demand for money (real M 1) have been analyzed by using Vector Error Correction Model (VECM) to find out the cointegration between demand for money (real M1) and its variables, real income and interest rate in in India 1991–2011.The application of integration requires that time series to be tested for stationarity. A time series is to be said stationary if its mean and variance are invariant overtime. If the time series is stationary at level then it is possible to run the regression directly. If the time series are not stationary at level then we take the first difference and then test their stationarity thereafter. To check the stationarity we use the Augmented Dickey-Fuller (ADF) and the Philips-Perron unit root testes. Top Keywords Cointegration, Demand for money, Interest rate, Real income, Test of sationarity, VECM. Top | | | |
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