Structural Breaks and Unit Roots: A Further Test of the Sustainability of the Indian Fiscal Deficit
AbstractIf public expenditure and public revenue are I(0) public debt is sustainable but if these are I(1) and not cointegrated or have a cointegrating vector di erent from [1, -1] the public debt is said to be unsustainable. Extant work indicates that India’s public debt is unsustainable. We re-investigate this issue by allowing for endogenous structural breaks for two data sets - the British period 1871-1921 and the post independence period 1950-1997. Revenue and expenditure series (nominal as well as real) are trend stationary with structural breaks, at least for the post independence period. Thus Indian public debt is not unsustainable.
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Bibliographic InfoPaper provided by The Australian National University, Australia South Asia Research Centre in its series ASARC Working Papers with number 2001-08.
Date of creation: Sep 2001
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Structural Break; Unit Root; Public Finance; Revenue; Expenditure;
Find related papers by JEL classification:
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
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