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India’s Twin Deficit Hypothesis: An Asymmetric ARDL Perspective

Author

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  • Santhosh Kumar

    (Centre for Budget Studies, Cochin University of Science and Technology, Kerala)

Abstract

This study examines the relationship between fiscal deficit and trade deficit, known as ‘twin deficits hypotheses, in the Indian economy between 1977-2022. This study’s empirical results are derived using the Asymmetric cointegration technique (Nonlinear Autoregressive Distributed Lag model - NARDL) to estimate the long-run and short-run relationship. Zivot and Andrew’s (ZA) unit root test determines structural breaks in the series of the twin deficit variables. The asymmetric NARDL results for the short-run and long-run confirm that the trade deficit hypothesis can decide India’s fiscal deficit. Their relationship is healthier in the long-run.

Suggested Citation

  • Santhosh Kumar, 2025. "India’s Twin Deficit Hypothesis: An Asymmetric ARDL Perspective," Economic Alternatives, University of National and World Economy, Sofia, Bulgaria, issue 4, pages 1182-1199, Desember.
    • Handle: RePEc:nwe:eajour:y:2025:i:4:p:1182-1199
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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