Tracking the Transmission Channels of Fiscal Deﬁcit and Food Inﬂation Linkages: A Structural VAR Approach
Indian Journal of Economics and Development
Volume 16 No. 2, 2020, 165-172
Indexed in Clarivate Analytics (ESCI) of WoS
Assistant Professor, Department of Economics, CHRIST (Deemed to be University), Delhi NCR Campus, Marium Nagar, Ghaziabad-201003 (Uttar Pradesh)
This empirical analysis aspired to unearth the transmission channels of fiscal deﬁcit and food inﬂation linkages in the Indian perspective by reasonably exerting the data for 1991 to 2017. The precise results of structural vector autoregressive (SVAR) analysis proffered that there were three different mechanisms of transmission such as consumption, general inflation, and import channels that led to food inflation in response to the high fiscal deficit. The first channel revealed that government deﬁcit spending had a positive impact on income which further led to food inflation through surging the household consumption expenditure. It was concluded that ﬁscal deﬁcit passed through general inflation finally leading to a food price surge in the economy and seemed to work as cost-push inflation for the food and agricultural industry. The outcome also revealed that the impact of ﬁscal deﬁcit passed to food inflation through external linkages such as import and export.
Fiscal deficit, food inflation, SVAR.
E52, E60, H61, H63.