MONETIZATION, FINANCIAL LIBERALIZATION, AND ECONOMIC-DEVELOPMENT

In this article an attempt is made to understand the role of financial liberalization in a financially repressed underdeveloped economy with a declining barter sector (India). The empirical estimates point to a) complementarity between money and capital in estimating the demand for money function, and b) complementarity between money and capital in estimating the investment function. These results provide some evidence on the efficacy of financial liberalization as a device for increasing the rate of capital formation in India. Several specific policy conclusions are discussed. -from Author