An econometric analysis of the effectiveness of fiscal and monetary policies in India
This study investigate the effectiveness of fiscal policy and monetary policy in India. We collected thetime series data for India ranging from 1960 to 2019 from World Development Indicator (WDI). Weapplied the bound test to check the long-run relationship between fiscal policy, monetary policy andeconomic growth. The short-run and long-run effects of fiscal policy and monetary policy have beenestimated using ARDL models. The results showed that there is a long-run relationship between fiscaland monetary policies with economic growth. The estimated short-run coefficients indicated that afew immediate short run impact of fiscal and monetary policies are insignificant. However, the shortrun impacts become significant as time passes. The long-run results suggested that the long-runimpact of both fiscal and monetary policies on economic growth are positive and significant. Morespecifically, the GDP level increases if the money supply and government expenditure increase(Expansionary fiscal and monetary policies). On the other hand, the GDP level decrease if the moneysupply and government expenditure decrease (contractionary fiscal and monetary policies).Therefore, this study recommend to use expansionary policies to spur the Indian economy.