Base money shocks have stronger impact on Indian economy than interest rates
The researchers built a model to study why the impact of money on the Indian economy is weak. They found that changes in the amount of money in circulation have a bigger and longer-lasting effect on the economy than changes in interest rates. Contrary to common belief, regulations on banks and interest rates do not weaken the impact of money on the economy. The presence of an informal sector in the economy makes it harder for changes in money to affect the overall economy.