Variations in Prices due to Anticipated and Unanticipated Money
Journal Title: Asian Economic and Financial Review - Year 2012, Vol 2, Issue 1
Abstract
The relation between money and price has unique relevance in price stability. Rational expectations theorists hold that both anticipated and unanticipated money supply affect price level. This paper addresses this issue and enquires if anticipated and unanticipated money supplies have any role in the variations in whole sale and consumer prices (WPI & CPI) in India over the period 1992:Q1 to 2010:Q3. It is found that both anticipated and unanticipated money supply shocks cause rise in WPI and CPI inflation and justifying the rational expectations proposition. Price level, therefore, can be stabilized through appropriate monetary management.
Authors and Affiliations
Biswajit Maitra| Assistant Professor of Economics Surya Sen College, West Bengal, India, C. K. Mukhopadhyay| Professor of Economics University of North Bengal, West Bengal, India
Keywords
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