Law and Economics of Fiscal Deficit in India - 1998-99 to 2004-05
Centre of Risk Management and Derivatives (CRMD Jodhpur)
R. Das, RESEARCH METHODOLOGY IN SOCIAL SCIENCES AND MANAGEMENT, Verlag, 2010
Indian legal frame compels the central bank of the country to increase money supply through financing fiscal deficits and thus fuels inflation, but, the liberalization of the economy has neutralized such inflationary potential. This article shows that the influence of such deficit financing on money stock became virtually nil during the post reform period, rather foreign exchange assets emerged as a powerful determinant of money stock.
Keywords: Central Budget Deficit, Central Bank Credit to Central Government, Money Stock, Net Foreign Exchange Assets, Vector Autoregression
JEL Classification: B22Accepted Paper Series
Date posted: September 8, 2011 ; Last revised: September 19, 2011
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