Arthshastra Indian Journal of Economics & Research

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Revisiting the Sustainability of Kerala State Finances


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1 Research Scholar, Department of Economics, University College, University of Kerala, Palayam, Trivandrum - 695 034, Kerala, India

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Using yearly data from 1970-71 to 2015-16, the paper tried to find out whether fiscal sustainability existed in Kerala or not. It also examined whether structural breaks are present in the fiscal policy. Applying cointegration techniques with breaks and no breaks to the inter-temporal budget constraint model, the paper concluded that sustainability of current fiscal policy of Kerala was weak, which implies a long-run risk of debt default in Kerala State finances.

Keywords

Fiscal Sustainability, Kerala, Cointegration, Structural Break.

JEL Classification: C5, E62, H6.

Paper Submission Date: May 23, 2018; Paper Sent Back for Revision: February 13, 2019; Paper Acceptance Date: February 22, 2019.

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  • Revisiting the Sustainability of Kerala State Finances

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Authors

T. Liji Lakshmanan
Research Scholar, Department of Economics, University College, University of Kerala, Palayam, Trivandrum - 695 034, Kerala, India

Abstract


Using yearly data from 1970-71 to 2015-16, the paper tried to find out whether fiscal sustainability existed in Kerala or not. It also examined whether structural breaks are present in the fiscal policy. Applying cointegration techniques with breaks and no breaks to the inter-temporal budget constraint model, the paper concluded that sustainability of current fiscal policy of Kerala was weak, which implies a long-run risk of debt default in Kerala State finances.

Keywords


Fiscal Sustainability, Kerala, Cointegration, Structural Break.

JEL Classification: C5, E62, H6.

Paper Submission Date: May 23, 2018; Paper Sent Back for Revision: February 13, 2019; Paper Acceptance Date: February 22, 2019.




DOI: https://doi.org/10.17010/aijer%2F2019%2Fv8i1%2F142711