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Foreign Capital, Inflation, Sterilization, Crowding-Out and

Author

Listed:
  • Nirvikar Singh

    (University of California, Santa Cruz)

  • T.N. Srinivasan

    (Yale University)

Abstract

This paper discusses some puzzles in the contemporary macroeconomic scene in India, from the perspective of public finance and economic development. These include a fiscal deficit higher than it was during the 1991 crisis, but without a large current account deficit or rise in inflation or interest rates, a rising inflow of external capital, accompanied by the RBI’s sterilizing these inflows and accumulating large reserves, even in the face of low inflation. We offer a critique of some previous analyses, and some models that are suggestive of how real and monetary factors might be integrated in providing a firmer grounding for the policy debates current in India.

Suggested Citation

  • Nirvikar Singh & T.N. Srinivasan, 2004. "Foreign Capital, Inflation, Sterilization, Crowding-Out and," International Finance 0412001, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpif:0412001
    Note: Type of Document - pdf; pages: 41
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/if/papers/0412/0412001.pdf
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    References listed on IDEAS

    as
    1. Singh, Nirvikar & Srinivasan, T. N., 2004. "Fiscal Policy in India: Lessons and Priorities," Santa Cruz Center for International Economics, Working Paper Series qt67t3p20w, Center for International Economics, UC Santa Cruz.
    2. Deepak Lal, 2002. "Financial Exuberace: Savings Deposits, Fiscal Deficits and Interest Rates In India," UCLA Economics Working Papers 821, UCLA Department of Economics.
    3. Craig Burnside & Martin Eichenbaum & Sergio Rebelo, 2001. "Prospective Deficits and the Asian Currency Crisis," Journal of Political Economy, University of Chicago Press, vol. 109(6), pages 1155-1197, December.
    4. Vijay Joshi & Sanjeev Sanyal, 2004. "Foreign Inflows and Macroeconomic Policy in India," India Policy Forum, Global Economy and Development Program, The Brookings Institution, vol. 1(1), pages 135-188.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Buiter, Willem & Patel, Urjit R., 2006. "India's Public Finances: Excessive Budget Deficits, a Government-Abused Financial System and Fiscal Rules," CEPR Discussion Papers 5502, C.E.P.R. Discussion Papers.

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    More about this item

    Keywords

    foreign capital; sterilization; absorption; crowding out; inflation; growth;
    All these keywords.

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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