Fiscal deficits, banking rises and policy reveersal in a semi-open economy
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Sharma, Anurag; Jha, Raghbendra
Description
We study the effect of domestic policies and external shocks in a semi-open economy characterized by incomplete liberalization of the financial sector. We argue that in such transition economies stabilization programs can have a negative impact on the fiscal imbalances, offsetting to some extent the very achievement of the stabilization program. We develop a simple general equilibrium model which allows propagation of shocks in the presence of government guarantees and imperfect capital...[Show more]
dc.contributor.author | Sharma, Anurag | |
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dc.contributor.author | Jha, Raghbendra | |
dc.date.accessioned | 2015-12-10T22:36:08Z | |
dc.identifier.issn | 0264-9993 | |
dc.identifier.uri | http://hdl.handle.net/1885/56558 | |
dc.description.abstract | We study the effect of domestic policies and external shocks in a semi-open economy characterized by incomplete liberalization of the financial sector. We argue that in such transition economies stabilization programs can have a negative impact on the fiscal imbalances, offsetting to some extent the very achievement of the stabilization program. We develop a simple general equilibrium model which allows propagation of shocks in the presence of government guarantees and imperfect capital mobility. We also empirically test the impact of positive foreign interest shock on the Indian economy using a reduced form VAR approach. The econometric evidence, though broadly consistent with the main predictions of the model, suggests no significant impact of foreign interest rate shock on output and credit. We conclude that incomplete liberalization of the financial sector in transition economies has two effects. It reduces i) exposure to external financial shocks (like the current credit crisis) and ii) ability to deal with real sector shocks (which may arise from global recession in the medium term) due to endogenous policy reversals and presence of government guarantees. | |
dc.publisher | Butterworths | |
dc.source | Economic Modelling | |
dc.subject | Keywords: Banking crises; India; Policy reversal; Stabilization; VAR | |
dc.title | Fiscal deficits, banking rises and policy reveersal in a semi-open economy | |
dc.type | Journal article | |
local.description.notes | Imported from ARIES | |
local.identifier.citationvolume | 29 | |
dc.date.issued | 2011 | |
local.identifier.absfor | 140212 - Macroeconomics (incl. Monetary and Fiscal Theory) | |
local.identifier.absfor | 140302 - Econometric and Statistical Methods | |
local.identifier.ariespublication | u4002919xPUB367 | |
local.type.status | Published Version | |
local.contributor.affiliation | Sharma, Anurag, Monash University | |
local.contributor.affiliation | Jha, Raghbendra, College of Asia and the Pacific, ANU | |
local.description.embargo | 2037-12-31 | |
local.bibliographicCitation.issue | 2 | |
local.bibliographicCitation.startpage | 271 | |
local.bibliographicCitation.lastpage | 282 | |
local.identifier.doi | 10.1016/j.econmod.2011.10.005 | |
local.identifier.absseo | 910108 - Monetary Policy | |
dc.date.updated | 2016-02-24T10:22:23Z | |
local.identifier.scopusID | 2-s2.0-84856224865 | |
local.identifier.thomsonID | 000301395500018 | |
Collections | ANU Research Publications |
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