The Structural Relationship between Current and Capital Account Balance in India: A Time Series Analysis
The long run relationship between current account balance (CAB) and capital account balance (KAB) and the repercussions of capital account convertibility (KAC) on growth process of a country is a much debated issue. In particular, in the aftermath of the Southeast Asian crisis, the limitation of the liberal capital regime for a developing country like India is often highlighted in the literature. However, the probable impact of introducing KAC on CAB in India generally is discussed theoretically. Though some of the existing studies in India have earlier focused on this research question, they have done so by exogenously assuming the existence of a single structural break in the interrelationship between CAB and KAB. The present study intends to bridge the gap in the literature by raising two empirical questions: first, how far KAC is likely to destabilize the CAB and second, measuring the strength of the interrelationship between CAB and KAB. The current paper also contributes to the literature by incorporating multiple endogenous structural breaks in the empirical analysis. The empirical findings do not support any long term relationship between capital and current account balance and reveals that two significant structural breaks are observed in 1993-94 and 2003-04.
|Date of creation:||20 May 2010|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Borensztein, E. & De Gregorio, J. & Lee, J-W., 1998.
"How does foreign direct investment affect economic growth?1,"
Journal of International Economics,
Elsevier, vol. 45(1), pages 115-135, June.
- Eduardo Borensztein & Jose De Gregorio & Jong-Wha Lee, 1995. "How Does Foreign Direct Investment Affect Economic Growth?," NBER Working Papers 5057, National Bureau of Economic Research, Inc.
- Gregory, Allan W. & Hansen, Bruce E., 1996.
"Residual-based tests for cointegration in models with regime shifts,"
Journal of Econometrics,
Elsevier, vol. 70(1), pages 99-126, January.
- Gregory, Allan W & Hansen, Bruce E, 1996. "Tests for Cointegration in Models with Regime and Trend Shifts," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(3), pages 555-560, August.
- Tom Doan, "undated". "RATS programs to replicate results from Gregory and Hansen(1996) JOE article," Statistical Software Components RTZ00081, Boston College Department of Economics.
- Allan w. Gregory & Bruce E. Hansen, 1992. "residual-Based Tests for Cointegration in Models with Regime Shifts," Working Papers 862, Queen's University, Department of Economics.
- Tom Doan, "undated". "GREGORYHANSEN: RATS procedure to implement Gregory-Hansen test for Cointegration with breaks," Statistical Software Components RTS00082, Boston College Department of Economics.
- Gregory, A.W. & Hansen, B.E., 1992. "Residual-Based Tests for Cointegration in Models with Regime Shifts," RCER Working Papers 335, University of Rochester - Center for Economic Research (RCER).
- Abhijit Sen Gupta, 2007.
"Does Capital Account Openness Lower Inflation?,"
- Lawrence J. Christiano, 1988.
"Searching For a Break in GNP,"
NBER Working Papers
2695, National Bureau of Economic Research, Inc.
- Chorng-Huey Wong & Luis Carranza, 1999.
"Policy Responses to External Imbalances in Emerging Market Economies: Further Empirical Results,"
IMF Staff Papers,
Palgrave Macmillan, vol. 46(2), pages 5-5.
- Luis Carranza & Chorng-Huey Wong, 1998. "Policy Responses to External Imbalances in Emerging Market Economies; Further Empirical Results," IMF Working Papers 98/103, International Monetary Fund.
- Michael W. Klein & Giovanni P. Olivei, 1999.
"Capital account liberalization, financial depth, and economic growth,"
99-6, Federal Reserve Bank of Boston.
- Michael W. Klein & Giovanni Olivei, 1999. "Capital Account Liberalization, Financial Depth and Economic Growth," NBER Working Papers 7384, National Bureau of Economic Research, Inc.
- Dierk Herzer & Nowak-Lehmann Felicitas, 2006. "Is there a long-run relationship between exports and imports in Chile?," Applied Economics Letters, Taylor & Francis Journals, vol. 13(15), pages 981-986.
- Abhijit Sen Gupta, 2007. "Does Capital Account Openness Lower Inflation?," Indian Council for Research on International Economic Relations, New Delhi Working Papers 191, Indian Council for Research on International Economic Relations, New Delhi, India.
- BAI, Jushan & PERRON, Pierre, 1998.
"Computation and Analysis of Multiple Structural-Change Models,"
Cahiers de recherche
9807, Universite de Montreal, Departement de sciences economiques.
- Jushan Bai & Pierre Perron, 2003. "Computation and analysis of multiple structural change models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(1), pages 1-22.
- Eswar S. Prasad & Raghuram Rajan, 2008.
"A Pragmatic Approach to Capital Account Liberalization,"
NBER Working Papers
14051, National Bureau of Economic Research, Inc.
- Eswar S. Prasad & Raghuram G. Rajan, 2008. "A Pragmatic Approach to Capital Account Liberalization," Journal of Economic Perspectives, American Economic Association, vol. 22(3), pages 149-172, Summer.
- Prasad, Eswar & Rajan, Raghuram G., 2008. "A Pragmatic Approach to Capital Account Liberalization," IZA Discussion Papers 3475, Institute for the Study of Labor (IZA).
- Zivot, Eric & Andrews, Donald W K, 2002.
"Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis,"
Journal of Business & Economic Statistics,
American Statistical Association, vol. 20(1), pages 25-44, January.
- Zivot, Eric & Andrews, Donald W K, 1992. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(3), pages 251-270, July.
- Eric Zivot & Donald W.K. Andrews, 1990. "Further Evidence on the Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Cowles Foundation Discussion Papers 944, Cowles Foundation for Research in Economics, Yale University.
- Renu Kohli, 2004. "Capital Account Liberalisation: Empirical Evidence and Policy Issues II," International Finance 0405009, EconWPA.
- Debashis Chakraborty & Arup Guha, 2007. "Should India Opt for Full Capital Account Convertibility?," Foreign Trade Review, Indian Institute of Foreign Trade, vol. 42(1), pages 3-27, April.
- Naoto Kunitomo, 1996. "Tests Of Unit Roots And Cointegration Hypotheses In Econometric Models," The Japanese Economic Review, Japanese Economic Association, vol. 47(1), pages 79-109, 03.
- Michael Mussa & Giovanni Dell'Ariccia & Barry J. Eichengreen & Enrica Detragiache, 1998. "Capital Account Liberalization; Theoretical and Practical Aspects," IMF Occasional Papers 172, International Monetary Fund.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:22806. 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)
If references are entirely missing, you can add them using this form.