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Foreign Capital, Inflation, Sterilization, Crowding-Out and

  • Nirvikar Singh

    (University of California, Santa Cruz)

  • T.N. Srinivasan

    (Yale University)

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.

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File URL: http://econwpa.repec.org/eps/if/papers/0412/0412001.pdf
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Paper provided by EconWPA in its series International Finance with number 0412001.

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Length: 41 pages
Date of creation: 06 Dec 2004
Date of revision:
Handle: RePEc:wpa:wuwpif:0412001
Note: Type of Document - pdf; pages: 41
Contact details of provider: Web page: http://econwpa.repec.org

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  1. Craig Burnside & Martin Eichenbaum & Sergio Rebelo, 1998. "Prospective Deficits and the Asian Currency Crisis," NBER Working Papers 6758, National Bureau of Economic Research, Inc.
  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. Singh, Nirvikar & Srinivasan, T. N., 2004. "Fiscal Policy in India: Lessons and Priorities," Santa Cruz Department of Economics, Working Paper Series qt8nx3v467, Department of Economics, UC Santa Cruz.
  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.
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