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Macroeconomic effects of public investment in infrastructure in India

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  • K.N. Murty
  • A. Soumya

Abstract

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.

Suggested Citation

  • K.N. Murty & A. Soumya, 2011. "Macroeconomic effects of public investment in infrastructure in India," International Journal of Trade and Global Markets, Inderscience Enterprises Ltd, vol. 4(2), pages 187-211.
  • Handle: RePEc:ids:ijtrgm:v:4:y:2011:i:2:p:187-211
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    References listed on IDEAS

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    1. K. Krishnamurty & V. Pandit, 1996. "Exchange Rate, Tariff and Trade Flows: Alternative Policy Scenarios for India," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 31(1), pages 57-89, January.
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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. Syed Ammad Ali & Qazi Masood Ahmed & Lubna Naz, 2016. "Public spending on human capital formation and economic growth in Pakistan," Asia-Pacific Development Journal, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), vol. 23(1), pages 1-20, June.
    3. Ismihan, Mustafa & Ozkan, F. Gulcin, 2011. "A Note On Public Investment, Public Debt, And Macroeconomic Performance," Macroeconomic Dynamics, Cambridge University Press, vol. 15(02), pages 265-278, April.

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