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Macroeconomic effects of public investment in infrastructure in India


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  • K.N. Murty
  • A. Soumya


This paper attempts to improve the aggregative, structural, macroeconometric model for India that has been under development by the author and his associates in recent years. Specifically, it uses 3SLS with simultaneously iterative weighing matrix and coefficients. This gave more efficient estimates of the parameters and better goodness-of-fit statistics. The model emphasises the inter-relationships between internal and external balances and also the relation between money, output, prices and balance of payments. A few counterfactual simulations relating to stepping-up public investment in infrastructure as a way of overcoming the global economic crisis in India are illustrated. Public investment through commercial bank borrowing seems to have an advantage over other ways of financing investment in India.

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Bibliographic Info

Article provided by Inderscience Enterprises Ltd in its journal Int. J. of Trade and Global Markets.

Volume (Year): 4 (2011)
Issue (Month): 2 ()
Pages: 187-211

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Handle: RePEc:ids:ijtrgm:v:4:y:2011:i:2:p:187-211

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Keywords: public investment; infrastructure; macroeconometrics; economic crises; India; aggregative models; structural models; three-stage least squares; 3SLS; iterative weighing matrixes; iterative weighing coefficients; parameters; goodness-of-fit; inter-relationships; internal balances; external balances; money; outputs; prices; balance of payments; counterfactual simulations; commercial banks; borrowing; investment financing; globalisation; trade; global markets; global economy; policy analysis.;

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Cited by:
  1. K. N. Murty & A. Soumya, 2006. "Effects of Public Investment in Infrastructure on Growth and Poverty in India," Macroeconomics Working Papers 22373, East Asian Bureau of Economic Research.
  2. Ismihan, Mustafa & Ozkan, F. Gulcin, 2011. "A Note On Public Investment, Public Debt, And Macroeconomic Performance," Macroeconomic Dynamics, Cambridge University Press, Cambridge University Press, vol. 15(02), pages 265-278, April.


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