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Assessing External Sustainability in India
Author:
Mr. Tim Callen
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Mr. Paul Cashin
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Series:
IMF Working Papers
Volume/Issue:
Volume 1999: Issue 181
Language:
English
Publication Date:
01 Dec 1999
DOI:
https://doi.org/10.5089/9781451859171.001
ISBN:
9781451859171
ISSN:
1018-5941
Pages:
30
Keywords:
WP; mover accent; balance of payments; cash flow; current account deficit; capital controls; external sustainability; India; balance of payments crisis; current account position; consumption-smoothing model; current account sustainability; current account transaction; short-term debt; current account series; component of the current account; current account adjustment; consumption tilting; Current account; Current account deficits; Current account imbalances; Capital flows; Consumption distribution; Middle East; Global
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper examines the solvency and sustainability of India’s external imbalances and analyzes the optimality of its capital flows. We use three approaches: an intertemporal model of the current account that allows for capital controls; a composite model of macroeconomic indicators that yields probabilities of future balance of payments crises; and scenarios that examine the path of the current account consistent with the stabilization of India’s external liability-to-GDP ratio. The results indicate that India’s intertemporal budget constraint is satisfied and that the path of its current account imbalances is sustainable, with some support for the optimality (given capital controls) of its external borrowing.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund