Fiscal Deficit and Macroeconomic Instability: The Case of India

Ash Narayan Sah

The IUP Journal of Public Finance, 2005, vol. III, issue 4, 52-66

Abstract: This paper empirically examines the impact of fiscal deficit on the major macroeconomic variables. Monthly data on gross fiscal deficit, weighted average call money rate, net FIIs investment, Wholesale Price Index, Reserve money, Index of Industrial Production and new capital issue by non-government public limited companies were collected from Handbook of Statistics on Indian Economy, 2003-04 from the RBI website from April 1994-95 to March 2003-04. This study employed VAR methodology for empirical analysis. Results established that fiscal deficit significantly affects all macroeconomic variables. However, crowding-out of private investment is not supported by the data

Date: 2005
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Persistent link: https://EconPapers.repec.org/RePEc:icf:icfjpf:v:03:y:2005:i:4:p:52-66

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