Artha Vijnana: Journal of The Gokhale Institute of Politics and Economics

M. Thomas Paul ¹, Hemanta K. Pradhan ²

Affiliations
1 National Institute of Bank Management, Pune, IN
2 Institute for Financial Management and Research, Madras, IN

Abstract

Quarterly data for India for the period 1973 to 1983 support the existence of an 'Expectation Augmented Phillips Curve'. Our results contradict the hypothesis of the New-classical economists that unanticipated money growth leads to a sudden jump in price level and subsequently only to outout growth. We have, on the other hand, found much empirical support for the Buffer-stock approach to money. In India for this period there is much evidence for the 'Imported Inflation'. It appears that small but continuous exchange-rate depreciation during the period of study for India has not led to inflation.

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M. Thomas Paul , Medha Ashtekar

Abstract

It is generally pointed out that the forecasting performance of the structural models of the exchange-rate determination is poorer than that of the native Random-walk models. Among the most influential of the empirical studies of exchange-rate forecasting models were those performed by Meese and Rogoff (1983 a, 1983 b, 1985) (M - R) who found that during the 1976-1984 period on structural or time-series technique could appreciably outperform the Random-walk at any forecasting horizon shorter than 12 months. The forecasts M - R construced were based on the actual future values of the exogenous variables.

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