Debt Decomposition and the Role of Inflation: A Security Level Analysis for India
Piyali Das and
Chetan Ghate ()
No 451, IEG Working Papers from Institute of Economic Growth
In this paper, to study Indiaâ€™s debt dynamics, we assemble a novel data-set on Indian public debt with consistently defined aggregate annual components from 1951â€“2018, and Centre-State security level data from 2000â€“2018. Based on aggregate debt data, we quantify the contribution of inflation, real GDP growth, nominal interest rates and primary deficit/surplus towards Indiaâ€™s debt-dynamics. We find that inflation is an important component in financing Indiaâ€™s government debt historically. From the security level data, using the Hall-Sargent methodology, we find that nominal returns on the marketable and non-marketable portions of the Centreâ€™s debt account for the highest contribution towards changes in public debt. Our paper helps inform the debate on the adoption of flexible inflation targeting in India.
Keywords: Debt Decomposition; Fiscal Dominance; Indian Economy; Flexible Inflation Targeting; Public Debt in EMDEs. (search for similar items in EconPapers)
JEL-codes: E52 E62 E65 G12 G28 (search for similar items in EconPapers)
Pages: 58 pages
New Economics Papers: this item is included in nep-ban, nep-cwa, nep-mac and nep-mon
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Published as Institute of Economic Growth, Delhi, February 2022, pages 1-58
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Journal Article: Debt decomposition and the role of inflation: A security level analysis for India (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:awe:wpaper:451
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