What determines Current Account Deficits? An Empirical Exercise for India

Monetary policy is considered to be an important tool in the hands of an apex financial institution of any country in directing economic resources to achieve its goal. However there has been increasing literature focusing on its efficacy. This paper is an attempt in addressing the continuing debate about the efficacy of monetary policy in improving the macro economic condition of any country. Monetary management during the period 1980s and 1990s in India offers an interesting insight on the role of monetary policy. In this context, this paper focuses the major policy initiatives that are taken in that period and it's impact on the economy. It then goes on to predict the behavior of price level through money stock and output by employing the Ordinary Least Square (OLS) and Moving Average method.