Journal of Indian School of Political Economy

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Fiscal Deficits, Money Supply and Price Level:Empirical Evidence from India


Affiliations
1 RBI Endowment Unit, Institute for Social and Economic Change (ISEC), Nagarabhavi, Bangalore-72, India
2 Economics Unit, Institute for Social and Economic Change (ISEC), Nagarabhavi, Bangalore-72, India
3 Economics Unit, ISEC, Nagarabhavi, Bangalore-72, India
     

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This paper examines the dynamic relationship between fiscal deficits, money supply, and price level in India during the period 1960-61 to 1999-2000. Using vector autoregression (VAR) econometric methodology, which allows variables to be treated as potentially endogenous, the study finds that fiscal deficits and money supply are both influenced by each other. Further, it reveals that the price level does not influence either the fiscal deficit or money supply but rather is being influenced by both the variables.
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  • Fiscal Deficits, Money Supply and Price Level:Empirical Evidence from India

Abstract Views: 226  |  PDF Views: 0

Authors

Purna Chandra Parida
RBI Endowment Unit, Institute for Social and Economic Change (ISEC), Nagarabhavi, Bangalore-72, India
Hrushikesh Mallick
Economics Unit, Institute for Social and Economic Change (ISEC), Nagarabhavi, Bangalore-72, India
Maathai K. Mathiyazhagan
Economics Unit, ISEC, Nagarabhavi, Bangalore-72, India

Abstract


This paper examines the dynamic relationship between fiscal deficits, money supply, and price level in India during the period 1960-61 to 1999-2000. Using vector autoregression (VAR) econometric methodology, which allows variables to be treated as potentially endogenous, the study finds that fiscal deficits and money supply are both influenced by each other. Further, it reveals that the price level does not influence either the fiscal deficit or money supply but rather is being influenced by both the variables.