Abstract

This study investigates the stability of the money demand function in India amidst ongoing financial innovation. Using a comprehensive dataset spanning several decades we analyze the relationship between money demand and its determinants including income levels interest rates and financial innovations such as digital payments and new financial instruments. Our findings reveal that while traditional determinants continue to play a significant role the rapid pace of financial innovation has introduced notable shifts in the money demand function. We employ advanced econometric techniques to assess the stability of the money demand function over time and identify key factors contributing to its variability. The results suggest that while the overall demand for money remains relatively stable the impact of financial innovation on this relationship necessitates a nuanced understanding of monetary policy implications. This study provides valuable insights for policymakers and financial instit