How budget deficit and current account deficit are interrelated in Indian economy
The development in Indian economy brings the question of validity of the twin deficit hypothesis. The main aim of the article is theoretical and empirical analysis of the causal relationship between the budget deficit and the current account deficit in the Indian economy from the period 1990-2013. A...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
General Association of Economists from Romania
2016-03-01
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| Series: | Theoretical and Applied Economics |
| Subjects: | |
| Online Access: |
http://store.ectap.ro/articole/1174.pdf
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| Summary: | The development in Indian economy brings the question of validity of the twin
deficit hypothesis. The main aim of the article is theoretical and empirical analysis of the
causal relationship between the budget deficit and the current account deficit in the Indian
economy from the period 1990-2013. A co-integration test suggests that both the variables
have a long run association between each other and move with each other for a long period
of time. The Granger causality test clearly finds the existence of bidirectional relationship
between the twin deficit variables. The results indicate that twin deficit hypothesis exists in
India as opposed by direction between budget deficit and current account deficit. The study
finds the government need to find adequate monetary and fiscal policy for policy variables. |
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| ISSN: | 1841-8678 1844-0029 |