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Assessing External Sustainability in India

Author

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  • Tim Callen
  • Paul Cashin

Abstract

This paper examines the solvency and sustainability of India’s external imbalances and analyzes the optimality of its capital flows. We use three approaches: an intertemporal model of the current account that allows for capital controls; a composite model of macroeconomic indicators that yields probabilities of future balance of payments crises; and scenarios that examine the path of the current account consistent with the stabilization of India’s external liability-to-GDP ratio. The results indicate that India’s intertemporal budget constraint is satisfied and that the path of its current account imbalances is sustainable, with some support for the optimality (given capital controls) of its external borrowing.

Suggested Citation

  • Tim Callen & Paul Cashin, 1999. "Assessing External Sustainability in India," IMF Working Papers 99/181, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:99/181
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    Citations

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    Cited by:

    1. Benoît Mercereau, 2003. "The Role of Stock Markets in Current Account Dynamics; Evidence from the United States," IMF Working Papers 03/108, International Monetary Fund.
    2. Manoranjan SAHOO & M Suresh BABU & Umakant DASH, 2016. "Current account sustainability in SAARC economies: Evidence from combined cointegration approach," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(4(609), W), pages 281-298, Winter.
    3. Benoît Mercereau, 2004. "The Role of Stock Markets in Current Account Dynamics; a Time-Series Approach," IMF Working Papers 04/50, International Monetary Fund.
    4. Alexander Bilson Darku, 2010. "Consumption smoothing, capital controls and the current account in Ghana," Applied Economics, Taylor & Francis Journals, vol. 42(20), pages 2601-2616.
    5. Manoranjan SAHOO & M Suresh BABU & Umakant DASH, 2016. "Current account sustainability in SAARC economies: Evidence from combined cointegration approach," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(4(609), W), pages 281-298, Winter.
    6. Olumuyiwa S Adedeji, 2001. "The Size and Sustainability of Nigerian Current Account Deficits," IMF Working Papers 01/87, International Monetary Fund.
    7. JORDAN, Alwyn & STANFORD, Sunielle, 2006. "A Derivation Of The Optimal Current Account Balance For Barbados, Jamaica And Trinidad And Tobago," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 6(1).
    8. repec:pid:journl:v:55:y:2016:i:4:p:397-419 is not listed on IDEAS

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