Assessing External Sustainability in India

December 1, 1999

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Tim Callen, and Paul Cashin. Assessing External Sustainability in India, (USA: International Monetary Fund, 1999) accessed December 26, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

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.

Subject: Balance of payments, Capital flows, Consumption distribution, Current account, Current account deficits, Current account imbalances, National accounts

Keywords: Balance of payments, Balance of payments crisis, Capital controls, Capital flows, Cash flow, Component of the current account, Consumption distribution, Consumption tilting, Consumption-smoothing model, Current account, Current account adjustment, Current account deficit, Current account deficits, Current account imbalances, Current account position, Current account series, Current account sustainability, Current account transaction, External sustainability, Global, India, Middle East, Mover accent, Short-term debt, WP

Publication Details

Pages:

30
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1999/181
Stock No:

WPIEA1811999
ISBN:

9781451859171
ISSN:

1018-5941

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