Is there any Long-run Relationship between India’s Current and Capital Account Balance? A Time Series Analysis

Debashis Chakraborty (), Jaydeep Mukherjee () and Tanaya Sinha
Additional contact information
Tanaya Sinha: Tanaya Sinha is Research Fellow at Indian Institute of Foreign Trade (IIFT), New Delhi, 110 016, India. E-mail: tanaya82@gmail.com

Global Business Review, 2012, vol. 13, issue 3, 433-447

Abstract: The long-run relationship between current account balance (CAB) and capital account balance (KAB) and the repercussions of capital account convertibility (KAC) on the growth process of a country is a much-debated issue. In particular, in the aftermath of the Southeast Asian crisis, the limitation of the liberal capital regime for a developing country like India is often highlighted in the literature. However, the probable impact of introducing KAC on CAB in India is generally discussed theoretically. Though some empirical studies in India have recently focused on this research question, the current paper contributes to the literature first, by exploring the presence of any endogenous structural breaks in the individual series of CAB and KAB and then examining the nature of long-run relationship between them. Applying the ARDL method of co-integration, the empirical findings support the presence of a long term co-integrating relationship between capital and current account balance and reveals that a significant structural break is observed during 2002–03 for both the series.

Keywords: International capital movements; foreign exchange; current account adjustment; structural break; co-integration (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://journals.sagepub.com/doi/10.1177/097215091201300306 (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:sae:globus:v:13:y:2012:i:3:p:433-447

DOI: 10.1177/097215091201300306

Access Statistics for this article

More articles in Global Business Review from International Management Institute
Bibliographic data for series maintained by SAGE Publications ().