Open Access Open Access  Restricted Access Subscription Access
Open Access Open Access Open Access  Restricted Access Restricted Access Subscription Access

India's 'twin Deficits': Are they Identical Twins or the Warring Cousins


Affiliations
1 Korbel School of International Studies, University of Denver, Denver, CO 80209, United States
2 Indian Journal of Economics and Business (IJEB), Metropolitan State University of Denver, United States
     

   Subscribe/Renew Journal


This study tests the presence and behavior of the 'twin deficits'-a shorthand term referring to the trade and budget deficits-in India's economy between 1995 and 2010. Although each deficit is thought to have its own unique set of triggers, theoretical analyses and empirical studies have attempted to document and analyze the extent to which, and how, they act as 'twins' (i.e. move together over time). The period of analysis in this study provides an interesting case study because it is fully situated in India's period of 'liberalization,' after a balance of payments (BOP) crisis in the early 1990s catalyzed a set of reforms designed to improve the government and trade budgets. Our approach employs regression models and causality tests to find that while there is evidence of twin deficits in India over the time period in question, the direction of the causal relationship between these deficits stems from the trade deficit to the budget deficit, which is contrary to the direction that standard theory would predict.

Keywords

No keywords
Subscription Login to verify subscription
User
Notifications
Font Size


Abstract Views: 423

PDF Views: 0




  • India's 'twin Deficits': Are they Identical Twins or the Warring Cousins

Abstract Views: 423  |  PDF Views: 0

Authors

Sandy Fazeli Fard
Korbel School of International Studies, University of Denver, Denver, CO 80209, United States
Kishore G. Kulkarni
Indian Journal of Economics and Business (IJEB), Metropolitan State University of Denver, United States

Abstract


This study tests the presence and behavior of the 'twin deficits'-a shorthand term referring to the trade and budget deficits-in India's economy between 1995 and 2010. Although each deficit is thought to have its own unique set of triggers, theoretical analyses and empirical studies have attempted to document and analyze the extent to which, and how, they act as 'twins' (i.e. move together over time). The period of analysis in this study provides an interesting case study because it is fully situated in India's period of 'liberalization,' after a balance of payments (BOP) crisis in the early 1990s catalyzed a set of reforms designed to improve the government and trade budgets. Our approach employs regression models and causality tests to find that while there is evidence of twin deficits in India over the time period in question, the direction of the causal relationship between these deficits stems from the trade deficit to the budget deficit, which is contrary to the direction that standard theory would predict.

Keywords


No keywords



DOI: https://doi.org/10.15410/aijm%2F2013%2Fv2i2%2F50532