<abstract xmlns="http://www.w3.org/1999/xhtml">

<p>The paper explores the relationship between Central bank independence (CBI) and fiscal deficit in India. Moreover, the study tries to assess the impact of CBI on the levels of fiscal deficit. The study incorporates other variables like Gross Domestic Product, financial development, and trade openness to analyze their impact on the fiscal deficit. The study employed Auto-regressive distributed lag model (ARDL) Bounds test developed by Pesaran, Shin, and Smith (2001) to examine the long-run relationship between CBI and fiscal deficit. The study also employs a legal index for measuring CBI developed by Jasmine et al (2019) as well as an actual measure of independence developed by Cukierman (1992) to measure CBI in India. The study confirms the long-run relationship between the CBI and fiscal deficit as well as among other variables. An increase in the levels of CBI leads to falling in the levels of fiscal deficit. The other explanatory variables used in the study also confirm the long-run relationship and impact fiscal deficit negatively except for trade openness, which positively impacts the fiscal deficit.</p>
</abstract>

The paper explores the relationship between Central bank independence (CBI) and fiscal deficit in India. Moreover, the study tries to assess the impact of CBI on the levels of fiscal deficit. The study incorporates other variables like Gross Domestic Product, financial development, and trade openness to analyze their impact on the fiscal deficit. The study employed Auto-regressive distributed lag model (ARDL) Bounds test developed by Pesaran, Shin, and Smith (2001) to examine the long-run relationship between CBI and fiscal deficit. The study also employs a legal index for measuring CBI developed by Jasmine et al (2019) as well as an actual measure of independence developed by Cukierman (1992) to measure CBI in India. The study confirms the long-run relationship between the CBI and fiscal deficit as well as among other variables. An increase in the levels of CBI leads to falling in the levels of fiscal deficit. The other explanatory variables used in the study also confirm the long-run relationship and impact fiscal deficit negatively except for trade openness, which positively impacts the fiscal deficit.

Central Bank Independence and its Impact on Fiscal Deficit: Evidence from India

Parraywaseem.scholar@kashmiruniversity.net

Studia Universitatis „Vasile Goldis” Arad – Economics Series

This work is licensed under the Creative Commons Attribution 4.0 International License.

{"article-title":"Central Bank Independence and its Impact on Fiscal Deficit: Evidence from India"}

The paper explores the relationship between Central bank independence (CBI) and fiscal deficit in India. Moreover, the study tries to assess the impact of CBI...

Central Bank Independence and its Impact on Fiscal Deficit: Evidence from India

Published Online: Apr 01, 2023

Page range: 71 - 94

Received: Apr 01, 2022

Accepted: Sep 01, 2022

DOI: https://doi.org/10.2478/sues-2023-0009

Keywords
Central bank independence, Indian Economy, Fiscal deficit, Turnover rate, Cointegration

© 2023 Aijaz Ahmad Bhat et al., Published by VGWU Press

This work is licensed under the Creative Commons Attribution 4.0 International License.

Central Bank Independence and its Impact on Fiscal Deficit: Evidence from India

Published Online: Apr 01, 2023

Page range: 71 - 94

Received: Apr 01, 2022

Accepted: Sep 01, 2022

DOI: https://doi.org/10.2478/sues-2023-0009

KeywordsCentral bank independence, Indian Economy, Fiscal deficit, Turnover rate, Cointegration

© 2023 Aijaz Ahmad Bhat et al., Published by VGWU Press

This work is licensed under the Creative Commons Attribution 4.0 International License.

Keywords
Central bank independence, Indian Economy, Fiscal deficit, Turnover rate, Cointegration