Title: The effects of public debt on capital formation in India: evidence from structural VAR analysis
Author: Debi Prasad Bal
Address: Department of Liberal Arts, Indian Institute of Technology Hyderabad, Yeddumailaram, ODF campus, Andhra Pradesh, 502205, India
Abstract: This paper provides the empirical evidence of the effects of public debt on interest rate, output and gross fixed capital formation in India during the period between the fourth quarter of 1998 and fourth quarter of 2012. Using the structural VAR model with variance decompositions and impulse response functions, the result shows that public debt has a positive impact on gross fixed capital formation as well as output. The findings of the study described in this paper broadly support the views of Keynesian economists.
Keywords: public debt; output; gross fixed capital formation; structural VAR; vector autoregressive; India; interest rates; Keynesian economics.
Int. J. of Monetary Economics and Finance, 2014 Vol.7, No.1, pp.66 - 80
Available online: 23 Jul 2014