IDEAS home Printed from
   My bibliography  Save this paper

External Shocks and the Indian Economy: Analyzing through a Small, Structural Quarterly Macroeconometric Model


  • NR, Bhanumurthy
  • Kumawat, Lokendra


Though a large number of structural macroeconometric models have been estimated for India, the fact that all these are based on annual data limit their usefulness for short-term policy analysis, particularly in volatile periods of the type seen during last few quarters. Therefore the present paper builds up a short-term macroeconometric model for India using quarterly data. The model has reasonably good in-sample performance. One important feature of the model is use of quadratic relation between government expenditure and credit to private sector, which shows presence of both crowding in and crowding out effects, the latter dominating the former when expenditure is high enough. Some simulations are also carried out to analyse the impact of recent external shocks such as rise in global food and fuel prices and the global financial meltdown, on the Indian economy. The results show that the current slowdown in India’s growth predates the global price shock and the global financial crisis, and is more of a regular cyclical downturn. The global developments only further deepen the slowdown and prolong the recovery.

Suggested Citation

  • NR, Bhanumurthy & Kumawat, Lokendra, 2009. "External Shocks and the Indian Economy: Analyzing through a Small, Structural Quarterly Macroeconometric Model," MPRA Paper 19776, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:19776

    Download full text from publisher

    File URL:
    File Function: original version
    Download Restriction: no

    References listed on IDEAS

    1. S. Mahendra Dev, 2008. "India," Chapters,in: Handbook on the South Asian Economies, chapter 1 Edward Elgar Publishing.
    2. David E. Rapach & Mark E. Wohar, 2006. "Structural Breaks and Predictive Regression Models of Aggregate U.S. Stock Returns," Journal of Financial Econometrics, Society for Financial Econometrics, vol. 4(2), pages 238-274.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Mundle, Sudipto & Bhanumurthy, N.R. & Das, Surajit, 2011. "Fiscal consolidation with high growth: A policy simulation model for India," Economic Modelling, Elsevier, vol. 28(6), pages 2657-2668.
    2. Bathla, Seema, 2012. "Volatility in Agriculture Commodity Prices in India: Impact and Macroeconomic and Sector-Specific Policy Responses," 123rd Seminar, February 23-24, 2012, Dublin, Ireland 122543, European Association of Agricultural Economists.
    3. Inayat Ullah Mangla, 2011. "Reconstructing the Performance of Pakistan’s Political Economy: Another Paradigm," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 16(Special E), pages 30-70, September.
    4. Bathla, Seema, 2011. "Resilience of Indian agriculture to external shocks: Analyzing through a structural econometric model," IAMO Forum 2011: Will the "BRICs Decade" Continue? – Prospects for Trade and Growth 14, Leibniz Institute of Agricultural Development in Central and Eastern Europe (IAMO).

    More about this item


    Structural model; External Shocks; India;

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • E19 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Other

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:19776. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.