New Monetary and Liquidity Aggregates for India : Some Empirical Observations

The developments in the Indian financial sector since the late 1980s affected the efficacy of the existing monetyary aggregates in explaining the monetary conditions in general and in providing insights into the state of liquidity in the economy in particular. Taking note of the above, the working group on money supply, analytics and methodology of compilation, RBI, has come out with a set of new monetary and liquidity aggregates. The present study makes an empirical attempt to find out the information content of the new set of aggregates about the goal variables such as Index of Industrial production(IIP) and Wholesale Price Index(WPI).The results from non-nested regression models and an indicator model yield mixed results