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Money Supply and its Impact on Generating Growth in National Product: Conceptualizing a New Macroeconomic Indicator - Acceleration of Money

Avik Ghosh

Abstract: This research work started with an aim to unveil the concept of a key macroeconomic indicator- velocity of money. Though not widely considered during health check of any economy, this indicator is important in measuring and ascertaining the prevailing broader economic condition. While discussing the concept of velocity of money and elaborating the impact of its effectiveness and fine-tuning on money supply, inflation, monetary policy and overall economic health, one new concept and term has been innovated- acceleration of money. Through cross-country analysis of major economies from developed and developing nations namely USA, India and China, it had been witnessed that acceleration of money, i.e. the change in velocity of money, justifies and conform major global events of economic turmoil. The acceptability of the acceleration term has been reassessed in Indian scenario with quarterly data analysis to find a gap in recent quarters with its previous ones. The acceleration of money term has been separately analysed in Indian scenario where a an autocorrelation has been established and a statistical ARMA(1,1) model has been established at lesser than 1% significant level. This model, without any unit root, may be a useful tool to evaluate the future tendency of acceleration.

Keywords: Velocity of Money, Velocity of Broad Money, Velocity of Currency in Circulation, Acceleration of Money, Money acceleration model, Unit Root testing, ARMA model.

Country: India, Subject Area: Economics

Pages: 256 - 261

Edition: Volume 8 Issue 10, October 2019

How to Cite this Article?

Avik Ghosh, "Money Supply and its Impact on Generating Growth in National Product: Conceptualizing a New Macroeconomic Indicator - Acceleration of Money", International Journal of Science and Research (IJSR), https://www.ijsr.net/archive/v8i10/show_abstract.php?id=3101901, Volume 8 Issue 10, October 2019, 256 - 261

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