Fiscal deficit, public debt and economic growth relationship: An empirical investigation on indian economy
*Corresponding Author: Dr. Ummed Singh Assistant Professor, Department of Economics, University of Rajasthan, Jaipur. firstname.lastname@example.org
This study is an empirical investigation to examine the dynamic interaction between fiscal deficit, public debt and economic growth in India for the time period 1991 to 2015, taking into account some the important macroeconomic variables, such as, interest rate, exchange rate, trade openness and internal and external debt. The analysis has been done by employing Unit Root Tests, Granger Causality Test, Vector Auto-Regression (VAR) and Johansen's Co-Integration The findings of the paper indicate that there is negative and significant relationship between fiscal deficit and economic growth in the long run. The VAR analysis shows that fiscal deficit positively influence public debt. The paper finds that there is a one way causation running from fiscal deficit to public debt, and public debt to economic growth. However, this study does not find any co-integration relationship among public debt, fiscal deficit and economic growth.
Fiscal deficit, Public debt, Economic growth, Trade openness, Granger Causality, Vector Auto-Regression (VAR), Johansen's Co-Integration.