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Financial crisis: The incrediable hulk in Indian economic growth and external sector

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  • Bera, Soumitra Kumar
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    Abstract

    This paper empirically examines the impact of current world-wide recession on India’s growth. The data for this study were compiled from RBI and Central Statistical Organisation (CSO). The paper has applied regression technique with GDP as dependent variable, while exports, imports, FDI and FII were taken as independent variables. Prior to regression analysis, all the variables are tested for stationarity, applying Augmented Dickey-Fuller (ADF) test. The data sets were also tested for seasonality by applying auxiliary regression. Because of the problem of multicolinearity among the independent variables, three models, dropping one of the highly collinear variables, were estimated. The results suggest that financial crisis has adversely impacted India’s GDP although imports, exports and FDI were found to have exercised stimulating influence through technological spillovers and other externalities. The paper suggests that recovery of global economy is extremely important for Indian economic growth although the effects of global slow down could be minimized through the use of stimulant fiscal and monetary measures.

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    Bibliographic Info

    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 27750.

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    Date of creation: 22 Apr 2010
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    Handle: RePEc:pra:mprapa:27750

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    Keywords: The impact on the world economy; Impact on Indian Economy; Impact on External Sector; Data Sources and Methodology; Regression Analysis: Discussion and Interpretation; Seasonality test; Regression Results and discussion; Conclusions;

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    1. Blomström, Magnus & Kokko, Ari, 1996. "Multinational Corporations and Spillovers," CEPR Discussion Papers 1365, C.E.P.R. Discussion Papers.
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    7. Awokuse, Titus O., 2007. "Causality between exports, imports, and economic growth: Evidence from transition economies," Economics Letters, Elsevier, vol. 94(3), pages 389-395, March.
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    13. Bende-Nabende, A. & Ford, J.L. & Sen, S. & Slater, J., 2000. "Long-Run Dynamics of FDI and its Spillovers Onto Output: Evidence From the Asia-Pacific Economic Cooperation Region," Discussion Papers 00-10, Department of Economics, University of Birmingham.
    14. Durham, J.B.J. Benson, 2004. "Absorptive capacity and the effects of foreign direct investment and equity foreign portfolio investment on economic growth," European Economic Review, Elsevier, vol. 48(2), pages 285-306, April.
    15. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S71-102, October.
    16. Luiz R. de Mello Jr., 1997. "Foreign Direct Investment in Developing Countries: A Selective Survey," Studies in Economics 9701, Department of Economics, University of Kent.
    17. Caves, Richard E, 1974. "Multinational Firms, Competition, and Productivity in Host-Country Markets," Economica, London School of Economics and Political Science, vol. 41(162), pages 176-93, May.
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