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Foreign Capital, Inflation, Sterilization, Crowding-Out and

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Author Info

  • Nirvikar Singh

    (University of California, Santa Cruz)

  • T.N. Srinivasan

    (Yale University)

Abstract

This paper discusses some puzzles in the contemporary macroeconomic scene in India, from the perspective of public finance and economic development. These include a fiscal deficit higher than it was during the 1991 crisis, but without a large current account deficit or rise in inflation or interest rates, a rising inflow of external capital, accompanied by the RBI’s sterilizing these inflows and accumulating large reserves, even in the face of low inflation. We offer a critique of some previous analyses, and some models that are suggestive of how real and monetary factors might be integrated in providing a firmer grounding for the policy debates current in India.

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File URL: http://128.118.178.162/eps/if/papers/0412/0412001.pdf
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Bibliographic Info

Paper provided by EconWPA in its series International Finance with number 0412001.

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Length: 41 pages
Date of creation: 06 Dec 2004
Date of revision:
Handle: RePEc:wpa:wuwpif:0412001

Note: Type of Document - pdf; pages: 41
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Web page: http://128.118.178.162

Related research

Keywords: foreign capital; sterilization; absorption; crowding out; inflation; growth;

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  1. Craig Burnside & Martin Eichenbaum & Sergio Rebelo, 2001. "Prospective Deficits and the Asian Currency Crisis," Journal of Political Economy, University of Chicago Press, vol. 109(6), pages 1155-1197, December.
  2. Singh, Nirvikar & Srinivasan, T. N., 2004. "Fiscal Policy in India: Lessons and Priorities," Santa Cruz Department of Economics, Working Paper Series qt67t3p20w, Department of Economics, UC Santa Cruz.
  3. Deepak Lal, 2002. "Financial Exuberace: Savings Deposits, Fiscal Deficits and Interest Rates In India," UCLA Economics Working Papers 821, UCLA Department of Economics.
  4. Vijay Joshi & Sanjeev Sanyal, 2004. "Foreign Inflows and Macroeconomic Policy in India," India Policy Forum, Global Economy and Development Program, The Brookings Institution, vol. 1(1), pages 135-188.
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