PUBLIC DEBT SUSTAINABILITY IN INDIA: A CO-INTEGRATION APPROACH BASED ON STRUCTURAL BREAKS WITH REGIME SHIFT

Shah Husain () and Mohammad Asif
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Shah Husain: Department of Economics, Aligarh Muslim University Aligarh, Uttar Pradesh, India
Mohammad Asif: Department of Economics, Aligarh Muslim University Aligarh, Uttar Pradesh, India

Journal of Internet Banking and Commerce, 2018, vol. 23, issue 03, 01-21

Abstract: In this paper we examine the sustainability of public debt in case of India. We have used combined government data (Centre’s and State’s government) for a period from 1990 to 2016). For testing the sustainability of debt, we have taken government revenues and expenditure. First we have investigated co-integration between government spending and revenues using ARDL bound testing model. The bound test reveals that there exists no long-run relationship between the variables. Gregory-Hansen and Hatemi-j threshold co-integration test are applied to test the sustainability hypothesis in the presence of regime shift. the result shows that no co-integration relationship between the variables in case of single structural break, but for two structural break our study confirm existence of co-integration relationship for the given variables. We do not find the long-run coefficients statistically significant for sustainability of public debt.

Keywords: Debt Sustainability; Government’s Revenues and Expenditures; ARDL Bound Test (search for similar items in EconPapers)
JEL-codes: A11 (search for similar items in EconPapers)
Date: 2018
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