Abstract

The issue of fiscal policy affecting interest rates is ever-evolving that depends on the structure of the economy and the strength of the financial markets. Hence, it is necessary to continuously validate this relationship between fiscal policy and interest rates. Towards this, the present paper tries to empirically examine and understand the transmission channels through which fiscal policy could affect short, medium, and long-term interest rates in India using Structural Vector Autoregression (SVAR) and Toda-Yamamoto causality approaches. Our results suggest that fiscal policy has a marginal impact on interest rates in the short run, while it has a larger positive impact on interest rates in the long run through the inflation route. In terms of the policy, in the long run, there is a need for containing the structural part of the fiscal deficit within the fiscal consolidation (Fiscal Responsibility and Budget Management Act) framework in India.

摘要

影响利率的财政政策问题不断演变，这取决于经济结构和金融市场的实力。因此，有必要不断验证财政政策与利率之间的这种关系。为此，本文尝试使用结构向量自回归 (SVAR) 和户田-山本因果关系方法，实证检验和理解财政政策可能影响印度短期、中期和长期利率的传导渠道。我们的研究结果表明，财政政策在短期内对利率有边际影响，而在长期通过通胀路径对利率有更大的积极影响。从政策上看，长期来看，