How budget deficit and current account deficit are interrelated in Indian economy

Umer Banday () and Ranjan Aneja
Additional contact information
Ranjan Aneja: Central University of Haryana, India

Theoretical and Applied Economics, 2016, vol. XXIII, issue 1(606), Spring, 237-246

Abstract: 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.

Keywords: current account deficit; budget deficit; co-integration; granger causality. (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://store.ectap.ro/articole/1174.pdf (application/pdf)
http://www.ectap.ro/articol.php?id=1174&rid=122 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:agr:journl:v:xxiii:y:2016:i:1(606):p:237-246

Access Statistics for this article

Theoretical and Applied Economics is currently edited by Mircea Dinu

More articles in Theoretical and Applied Economics from Asociatia Generala a Economistilor din Romania / Editura Economica Contact information at EDIRC.
Bibliographic data for series maintained by Mircea Dinu ().