Department of Economics and Finance
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Item Do fdi and public investment crowd in or crowd out private domestic investment in India(Project Muse, 2014) Bal, Debi PrasadThis paper examines the dynamic relationship between Private Domestic Investment (PDI), Foreign Direct Investment (FDI) and Public Investment (PU) in India for the period 1978-79 to 2009-10. Zivot and Andrews test has been used to know the structural break points in the data series. The empirical results derived from structural VAR model indicate that FDI has crowding in effects on PDI, whereas, PU neither Ôcrowd outÕ nor Ôcrowd inÕ PDI. Further, we found the evidence that shocks in PU and PDI have positively improved the FDI inflows in IndiaItem Public debt and economic growth in India: A reassessment(Elsevier, 2014-08) Bal, Debi PrasadThis paper examines the effect of public debt on economic growth in India between 1980 and 2011. Using the autoregressive distributed lag ARDL model, the paper traces a long-run equilibrium relationship between public debt and economic growth. The error correction model (ECM) results show that central government debt, total factor productivity (TFP) growth, and debt-services are affecting the economic growth in the short-run, and that the results are consistent with our a priori expectation. It is recommended that the government should follow the objective of inter-generational equity in fiscal management over the long term in order to stabilize debt-GDP ratio, particularly, after the global financial crisis.Item The effects of public debt on capital formation in India: evidence from structural VAR analysis(Inder Science, 2014-07) Bal, Debi PrasadThis paper provides the empirical evidence of the effects of public debt on interest rate, output and gross fixed capital formation in India during the period between the fourth quarter of 1998 and fourth quarter of 2012. Using the structural VAR model with variance decompositions and impulse response functions, the result shows that public debt has a positive impact on gross fixed capital formation as well as output. The findings of the study described in this paper broadly support the views of Keynesian economists.Item Nonlinear causality between crude oil price and exchange rate: A comparative study of China and India(Elsevier, 2015-09) Bal, Debi PrasadWhile several studies have examined the linear causal relationship between oil prices and exchange rates, little is known about the nonlinear causality between these two variables. The present paper tries to fill this research gap in the context of India and China. By applying the Hiemstra and Jones (1994) nonlinear Granger causality test to the VAR residuals, the study finds a significant bi-directional nonlinear Granger causality between oil prices and exchange rates in both countries. The findings suggest that the nonlinearity of oil price influences the exchange rate irrespective of the exchange rate regimes. Further, to check robustness, the persistence in the variance of oil price and exchange rate is taken into account using a GARCH (1, 1) model. While the results consistently hold in the case of India, with respect to China, a unidirectional causality runs from exchange rate to oil price. However, the oil price in China does not Granger cause exchange rate.Item Nexus between defense expenditure and economic growth in BRIC economies: An empirical investigation(MPRA, 2016) Bal, Debi PrasadThis paper considers the defense expenditure and economic growth nexus based on the cross-border problems and increasing geo-political presence for BRIC blocs over the period 1993-2014. Our approach is more methodological in terms of employing Panel cointegration and causality to highlight the fundamental relation between the defense expenditure and economic growth. Here we emphasize various economic considerations in terms of pre and post war, strategic and spatial phenomenon to capture the magnitude of gains from the increased defense spending in the region. We are using panel unit-root; panel cointegration and panel-Granger causality to highlight the fundamental relationship between the variables. We conclude by discussing the issues as well as quantifying the consequences of present geostrategic conditions associated with these economies.Item The Effects of Capital Formation on Economic Growth in India: Evidence from ARDL-bound Testing Approach(Sage, 2016-10) Bal, Debi PrasadThis article examines the impact of capital formation on economic growth in India covering the period from 1970 to 2012. This paper traces a long-run equilibrium relation between capital formation and economic growth and other control variables by using autoregressive distributed lag (ARDL) model. The error correction (ECM) model shows that the capital formation, trade openness, exchange rate and total factor productivity positively affect the economic growth and the inflation negatively affects the economic growth in the short run. It is recommended that government increases the level of capital formation in order to achieve a higher level of economic growth.Item Is Public Debt a Burden for India?(Wiley, 2016-03) Bal, Debi PrasadIn this paper, we investigated whether the government debt caused a burden for India over the period 1970–2013. We achieved this goal using Bohn's (1998) hypothesis in a structural VAR framework. This study did not find evidence to support Bohn's hypothesis in the context of India because no statistically significant relationship between public debt and gross primary deficit was found. Second, this study observed a positive response of interest payments due to the shock of public debt, which is not surprising. Third, a positive shock of public debt was statistically significant and negatively affected developmental expenditure. Similarly, interest payments negatively affected the gross primary deficit. We concluded that public debt in India was not a burden for the country.Item Do Macroeconomics Channels Matter for Examining Relationship Between Public Debt and Economic Growth in India?(Springer, 2017-05) Bal, Debi PrasadThis paper investigates the impact of public debt on economic growth using key macroeconomic channels for the period 1970–2013 in the context of India. The analysis is undertaken in two different steps: first, it is examined whether public debt has any nonlinear impact on economic growth and second, determines the key channels through which public debt affects economic growth. The results derived from 2SLS model show that public debt positively affects economic growth in the short run, while it shows a negative impact in the long run. Further, by using Nonlinear ARDL approach, this paper supports the existence of a nonlinear impact of public debt on economic growth. The channels through which public debt significantly affects economic growth are households saving, public investment and total factor productivity growth. From policy perspective, we suggest that government should target the public investment and productivity channels for utilizing the public debt in India, and the government should opt for borrowings as long as it leads to capital formation of the country.Item Is the demand for crude oil inelastic for India? Evidence from structural VAR analysis(Elsevier, 2018-07) Bal, Debi PrasadWe examine the dynamics of crude oil demand, crude oil price, and economic growth over the period of 1997–2016 in case of India. We derive the results from DNS unit root test and it indicates that all variables are stationary in their first order difference. Further, we apply Narayan and Popp (2010) two structure break test and find two break points, one in January 2002 and another one in November 2011 in case of crude oil price. Finally, the Structural VAR analysis depicts that there exists a negative and significant relation between crude oil price dummy and crude oil demand over the period. Further, the price elasticity shows that the percentage changes of crude oil demand response less as compare to the rise in crude oil price. This clearly suggests that crude oil price is moderately inelastic. This overall implies that global crude oil price fluctuation has not brought down India's crude oil import to a greater extent. In order to erase the bulging oil import bill, alternative strategies of producing methanol blended oil, revival of sick oil well production, and adoption of phase wise clean energy system could curb the import dependence of crude oil.Item Do fossil fuel and renewable energy consumption affect total factor productivity growth? Evidence from cross-country data with policy insights(Elsevier, 2019-04) Bal, Debi PrasadThis study examines whether types of energy consumption affects the total factor productivity (TFP) growth. Using annual data of 1981–2013 for the panel sample of 36 countries, the results show that fossil fuel consumption declines the TFP growth, whereas, renewable energy consumption boosts the TFP growth. However, the results vary across different sub-panels. Further, the results from panel Granger causality support the feedback hypothesis in the long-run, whereas, weak evidence is found in the short-run. Since our findings supported feedback hypothesis, thus, policy should focus on reducing fossil fuel and using more renewable energy for achieving a ‘‘win-win’’ position of sustainable higher productivity growth with protective environmental quality in the long-run.