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The Effects on the Indian Economy of an Expansion in Financial Capital Supply

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Listed:
  • J.A. Giesecke
  • P.B. Dixon
  • M.T. Rimmer
  • N.H. Tran
  • D. Pratap

Abstract

International financial institutions provide capital to a range of Indian financial intermediaries, and engage with these intermediaries in a range of ways that potentially improve the allocation of capital within India. We investigate the impact on the Indian economy of a hypothetical rise in foreign-supplied capital to local Indian financial institution investees, and the engagement activities that might be associated with it. We do this by modelling: (a) the effects on the Indian economy of the supply of additional $US 10 b. of financial capital phased in over five years, and (b) India benefiting from the capital efficiency enhancement effects arising from engagement with the providers of this capital. We undertake our investigation with a 150-sector dynamic computable general equilibrium model of the Indian economy (NCAER-VU-DYN, or NV-DYN) which builds on an existing comparative-static model (NCAER-VU). Compared with NCAER-VU, NV-DYN contains: (i) year-on-year dynamics, (ii) a treatment of the labour market that allows for temporary unemployment, (iii) a Lewis-style mechanism governing movement of unskilled labour between rural and urban activities, and (iv) a top-down facility for calculating employment impacts by gender.

Suggested Citation

  • J.A. Giesecke & P.B. Dixon & M.T. Rimmer & N.H. Tran & D. Pratap, 2020. "The Effects on the Indian Economy of an Expansion in Financial Capital Supply," Centre of Policy Studies/IMPACT Centre Working Papers g-308, Victoria University, Centre of Policy Studies/IMPACT Centre.
    • Handle: RePEc:cop:wpaper:g-308
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    References listed on IDEAS

    as
    1. Peter B. Dixon & Maureen T. Rimmer, 2004. "The US Economy from 1992 to 1998: Results from a Detailed CGE Model," The Economic Record, The Economic Society of Australia, vol. 80(s1), pages 13-23, September.
    2. Yinhua Mai & Xiujian Peng & Peter Dixon & Maureen Rimmer, 2014. "The economic effects of facilitating the flow of rural workers to urban employment in China," Papers in Regional Science, Wiley Blackwell, vol. 93(3), pages 619-642, August.
    3. Foster, Andrew D. & Rosenzweig, Mark R., 2010. "Is There Surplus Labor in Rural India?," Working Papers 85, Yale University, Department of Economics.
    4. Peter B. Dixon & Maureen T. Rimmer, 2004. "Disaggregation of results from a detailed general equilibrium model of the US to the State level," Centre of Policy Studies/IMPACT Centre Working Papers g-145, Victoria University, Centre of Policy Studies/IMPACT Centre.
    5. Peter B. Dixon & Maureen T. Rimmer & Marinos E. Tsigas, 2007. "Regionalising results from a detailed CGE model: Macro, industry and state effects in the U.S. of removing major tariffs and quotas," Papers in Regional Science, Wiley Blackwell, vol. 86(1), pages 31-55, March.
    6. Marc Jim M. Mariano & James A. Giesecke, 2016. "Forecasting development outcomes under alternative surplus labour assumptions," Applied Economics, Taylor & Francis Journals, vol. 48(42), pages 4019-4032, September.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    dynamic CGE; Indian economy; capital supply;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • J46 - Labor and Demographic Economics - - Particular Labor Markets - - - Informal Labor Market

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