Abstract:
The purpose of this study was to empirically re-examine the causal relationship between
money supply and economic growth in Sri Lanka. The time series data used in this
study were collected from the sample period from 1959 to 2013. An Augmented Dickey
Fuller (ADF) test was used for verifying the unit (stationary) root of the time series
variables such as money supply and economic growth, and then a simple regression
model was employed in this study to test the long-term relationship between the
variables. Based on the regression result, the coefficient of money supply was positive.
Therefore, there is a direct relationship between money supply and the Gross Domestic
Product (GDP).
