Definition, Measurement and Determination of Money Supply

Money is one of the important macro economic variables. Correct understanding of the role of money in economic activity hinges on defining and measuring money correctly. There has been a growing tendency both in India and abroad to conduct monetary analysis and policy in terms of empirically defined broad money and multiple measures of money Recently the Committee to Review the Working of the Monetary System also has held that M3 is the appropriate definition of money and that the money multiplier framework is dependable for money supply analysis and control. This would give a further wrong direction to the evolution of monetary theory and monetary policy as well as their information base in India.