Title: Macroeconomic effects of public investment in infrastructure in India

Authors: K.N. Murty, A. Soumya

Addresses: Department of Economics, School of Social Sciences, University of Hyderabad, Gachibowli 500 046, Hyderabad, India. ' Indian Council for Research on International Economic Relations (ICRIER), India Habitat Center, Core 6A, 4th Floor, Lodi Road, New Delhi 110003, India

Abstract: This paper attempts to improve the aggregative, structural, macroeconometric model for India that has been under development by the author and his associates in recent years. Specifically, it uses 3SLS with simultaneously iterative weighing matrix and coefficients. This gave more efficient estimates of the parameters and better goodness-of-fit statistics. The model emphasises the inter-relationships between internal and external balances and also the relation between money, output, prices and balance of payments. A few counterfactual simulations relating to stepping-up public investment in infrastructure as a way of overcoming the global economic crisis in India are illustrated. Public investment through commercial bank borrowing seems to have an advantage over other ways of financing investment in India.

Keywords: public investment; infrastructure; macroeconometrics; economic crises; India; aggregative models; structural models; three-stage least squares; 3SLS; iterative weighing matrixes; iterative weighing coefficients; parameters; goodness-of-fit; inter-relationships; internal balances; external balances; money; outputs; prices; balance of payments; counterfactual simulations; commercial banks; borrowing; investment financing; globalisation; trade; global markets; global economy; policy analysis.

DOI: 10.1504/IJTGM.2011.039323

International Journal of Trade and Global Markets, 2011 Vol.4 No.2, pp.187 - 211

Published online: 08 Apr 2015 *

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