Testing the Empirical Validity of Flexible Price Monetary Model of exchange rate determination between Indian Rs and US $
DOI:
https://doi.org/10.36676/jams.v1.i3.30Keywords:
Flexible Price monetary model, Stationarity test, Johnson Cointegration, Granger Causality, Engel Granger methodAbstract
March 1993 marks the beginning of flexible rate regime in India i.e. forex rate determined by demand and supply factors. This paper tries to fill in the gap in economic literature that has till on focused on testing the empirical validity of Flexible Price Monetary model which incorporates money demand and supply into the determining exchange rates between developed economies. We do it for developing and emerging economies. Our finding is in support of the model when we look it in long run horizon.
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