Fiscal Deficit and Interest Rate in India: A Cointegration Analysis

2006 ◽  
Vol 48 (1-2) ◽  
pp. 21
Author(s):  
Suparna Basu ◽  
Debabrata Datta
Keyword(s):  
Interest Rate ◽  
Cointegration Analysis ◽  
Fiscal Deficit

scholarly journals Causal nexus between fiscal deficit and economic growth

2016 ◽  
Vol 4 (8) ◽  
pp. 1-19
Author(s):  
Ravinthirakumaran Navaratnam ◽  
Kasavarajah Mayandy
Keyword(s):  
Economic Growth ◽  
Sri Lanka ◽  
South Asian ◽  
Negative Impact ◽  
Positive Impact ◽  
Cointegration Analysis ◽  
Annual Data ◽  
Fiscal Deficit ◽  
Asian Countries ◽  
The Impact

The impact of fiscal deficit on economic growth is one of the most widely debated issues among economists and policy makers in both developed and developing countries in the recent period. This paper seeks to examine the impact of fiscal deficit on economic growth in selected South Asian countries, namely, Bangladesh, India, Nepal, Pakistan and Sri Lanka using time series annual data over the period 1980 to 2014. The paper uses cointegration analysis, error correction modelling and Granger causality test under a Vector Autoregression (VAR) framework. The results from this study confirmed that the fiscal deficit has a negative impact on economic growth in the South Asian countries considered in this study except Nepal, which confirmed the positive impact. The results also highlighted that the direction of causality for the SAARC countries is mixed where fiscal deficit causes economic growth for Bangladesh, Nepal and Pakistan, but the reverse is true for India and Sri Lanka.  

scholarly journals Fiscal Consolidation and Macroeconomic Variables in India: A Cointegration Analysis

2018 ◽  
Vol 4 (02) ◽  
Author(s):  
Chittaranjan Nayak ◽  
Manaswini Panda
Keyword(s):  
Time Series ◽  
Time Series Data ◽  
Empirical Support ◽  
Private Investment ◽  
Cointegration Analysis ◽  
Series Data ◽  
Crowding Out ◽  
Fiscal Deficit ◽  
Fiscal Consolidation ◽  
The Impact

Fiscal consolidation is in the forefront of policy discussion in India since 1990s. But the debate on fiscal consolidation and its real effects has been unable to attain any culmination so far on analytical as well as empirical grounds. The present paper tries to examine the impact of fiscal consolidation on growth, inflation, private investment, and exchange rate in India by analysing a time series data for the period from 1980-81 to 2013-14. The paper observes that there exists a long run relationship between GDP, fiscal consolidation, inflation and private investment. Fiscal deficit reduces GDP significantly. This finding gives empirical support to the neoclassical school of thought. However, the paper does not find any significant crowding-out evidence in India. The conclusion as such is sensitive to lag selection, and inclusion of variables. Although necessary diagnostic checking has been done, a robust analysis warrants a longer time series. The question remains inconclusive that if fiscal deficit does not cause significant crowding-out of private investment, then what are the channels of its negative influence on GDP.

Does Fiscal Deficit Affect Interest Rate in India? An Empirical Investigation

2016 ◽  
Vol 5 (2) ◽  
pp. 87-103 ◽  
Author(s):  
Ritu Rani ◽  
Naresh Kumar
Keyword(s):  
Interest Rate ◽  
Error Correction ◽  
Money Supply ◽  
Real Interest Rate ◽  
Vector Error Correction Model ◽  
Fiscal Deficit ◽  
Correction Model ◽  
Vector Error Correction ◽  
Vector Error ◽  
Long Run

Fiscal deficit above a certain limit is not good for the country because high government borrowings raise the interest rate and crowd out private investment. This article is an attempt to analyze the impact of fiscal deficit on real interest rate in India over the time period of 1980–1981 to 2013–2014. Autoregressive distributed lags bound testing approach for cointegration and vector error correction model for Granger casualty are used in a multivariate framework in which money supply and inflation are included as additional variables. Bound test results confirm the long-run equilibrium relationship among the competing variables. Further, the rate of interest and fiscal deficit are positively related with each other in long run, whereas money supply and inflation are found to be negative and statistical significant. In addition, results of vector error correction model showed that there is unidirectional causality running from inflation to real interest rate in short run. Based on the findings, it is suggested that that proper fiscal consolidation is required to control high fiscal deficit and burgeoning interest rate in India. Further, government should move from market borrowing to tax revenue to offset fiscal deficit.

scholarly journals Impact of Fiscal Deficit and Government Debt on Interest Rate in Pakistan

2019 ◽  
pp. 1-17
Author(s):  
Najia Shakir ◽  
Sami Ullah ◽  
Salim Ullah Khan ◽  
Muhammad Qasim
Keyword(s):  
Interest Rate ◽  
Money Supply ◽  
Government Debt ◽  
Gdp Per Capita ◽  
Fiscal Deficit ◽  
Per Capita ◽  
The Government ◽  
The Interest Rate ◽  
Relationship Of ◽  
The Relationship

The current study was conducted in the year 2014 in Pakistan to investigate the impact of fiscal deficit and government debt on the interest rate.  Data on selected macroeconomic variables like fiscal deficit, government debt, GDP per capita, money supply and volume of trade etc. from the year 1990 to 2012.  The study also has tried to find out that how the interest rate in the country is affected by the government debt and fiscal deficit. Augmented Dickey-Fuller test was run to address the stationary issue in the data, and then Ordinary Least Square (OLS) model test was run to check the relationship among the variables. Two models were set in the study. In the first model, the relationship of GDP per capita, money supply, total debt servicing and volume of trade showed a significant relationship with the fiscal deficit, while in the second model the relationship of inflation, fiscal deficit, money supply, government debt and public debt showed a significant relationship with the interest rate. Policy makers are advised to focus on the increase of DGP/Capita and export volume. In order to sustain the rate of inflation, the government may regulate the money supply and public borrowing.

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