Structural Breaks and Unit Roots: A Further Test of the Sustainability of the Indian Fiscal Deficit

Raghbendra Jha and Anurag Sharma ()

ASARC Working Papers from The Australian National University, Australia South Asia Research Centre

Abstract: If public expenditure and public revenue are I(0) public debt is sustainable but if these are I(1) and not cointegrated or have a cointegrating vector di erent from [1, -1] the public debt is said to be unsustainable. Extant work indicates that India’s public debt is unsustainable. We re-investigate this issue by allowing for endogenous structural breaks for two data sets - the British period 1871-1921 and the post independence period 1950-1997. Revenue and expenditure series (nominal as well as real) are trend stationary with structural breaks, at least for the post independence period. Thus Indian public debt is not unsustainable.

Keywords: Structural Break; Unit Root; Public Finance; Revenue; Expenditure (search for similar items in EconPapers)
JEL-codes: C32 H50 (search for similar items in EconPapers)
Pages: 26
Date: 2001-09
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:pas:asarcc:2001-08

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