International Purchase

Ramu, S. Shiva

doi:10.1177/0015732515950404

Cited by 1 publication

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“…Similarly, Ratha (2012) has also found the twin deficits hypothesis to be valid for India but only in the short run, and no long-run causality is observed. Trying to assess the twin deficits hypothesis along with its transmission mechanism for India, Ramu (2017) has found the hypothesis to be relevant for the country. Using the structural vector auto regression (VAR) model and the impulse response function the study has claimed both Mundell-Fleming and Keynesian absorption approaches to be valid for India.…”

Section: Twin Deficits: a Review Of Empirical Literaturementioning

confidence: 99%

“…For example, Kim and Roubini (2008) have considered GDP, government budget deficit, domestic real interest rate, real exchange rate and the current account balance of the United States to trace the channel. Again, trying to uncover the transmission mechanism of India’s twin deficits problem, Ramu (2017) has claimed the country to follow both the channels highlighted by the traditional Keynesian economists as well as by Mundell (1963) and Fleming (1962). The author has tried to bring out India’s twin deficits channel by connecting the variables namely gross fiscal deficit, current account deficit, exchange rate and investment; through impulse response functions (IRFs) of a system equation.…”

Section: Twin Deficits: a Review Of Empirical Literaturementioning

confidence: 99%

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Dynamics of Twin Deficits: An Enquiry of the Mundell–Fleming Proposition for India

Devi

Sarma

2022

Foreign Trade Review

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Twin deficits have appeared as the indispensible reality of the Indian economy since long. The study is an attempt to trace out the inherent dynamics of India’s twin deficits problem, particularly to unveil its transmission mechanism. Applying annual secondary data for the period 1971 to 2019, the endeavour reveals India’s twin deficits encounter to follow the path prescribed by the Mundell- Fleming open economy IS-LM model. However, India’s realization is found to differ slightly from the standard theoretical manifestation. In India, domestic exchange rate is found to appreciate followed by the expansionary fiscal policies of the government. The improved exchange rate, owing to the sterilization policies of the monetary authority to uphold the country’s trade competitiveness, is observed to augment India’s domestic interest rate. Again, the increased interest rate, due to its positive effect on the financial inflows, is found to deteriorate India’s external balance. JEL Classification: H6, F32, F31, F21, E43

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Section: Twin Deficits: a Review Of Empirical Literaturementioning

confidence: 99%