This paper investigates the money supply/corporate profits relationship in a developing country, India. The empirical results show a positive relationship between money and profits, which in turn suggests a substantial wage lag in the corporate sector. A comparison of the money supply/ corporate profits relationship in India and the United States indicates that the link is stronger and the wage lag is longer in India. It is argued that the wage lag is longer in India because of fragmented labor markets, a less streamlined information dissemination process, and a higher rate of unemployment.
All Science Journal Classification (ASJC) codes
- Economics and Econometrics