Foreign Capital, Inflation, Sterilization, Crowding-Out and

Nirvikar Singh () and T.N. Srinivasan
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T.N. Srinivasan: Yale University

International Finance from EconWPA

Abstract: This paper discusses some puzzles in the contemporary macroeconomic scene in India, from the perspective of public finance and economic development. These include a fiscal deficit higher than it was during the 1991 crisis, but without a large current account deficit or rise in inflation or interest rates, a rising inflow of external capital, accompanied by the RBI’s sterilizing these inflows and accumulating large reserves, even in the face of low inflation. We offer a critique of some previous analyses, and some models that are suggestive of how real and monetary factors might be integrated in providing a firmer grounding for the policy debates current in India.

Keywords: foreign capital; sterilization; absorption; crowding out; inflation; growth (search for similar items in EconPapers)
JEL-codes: F30 F41 F43 H62 O4 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dev
Date: 2004-12-06
Note: Type of Document - pdf; pages: 41
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpif:0412001

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