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Asymmetric fiscal multipliers in India–Evidence from a non-linear cointegration

( 2021-01-01) Bhat, Javed Ahmad ; Sharma, Naresh Kumar

We attempted to scrutinize the efficacy of fiscal policy tools on key macroeconomic variables in case of India. Applying an asymmetric cointegration framework, the impact of public spending hike on output growth is significantly favourable and that of the decrease in it is insignificant. Similarly, effect of tax hikes is more pronouncing than tax cuts. Comparatively, results report more effectiveness of spending hikes than the tax cuts to avoid an economic downturn and tax hikes than spending cuts to cool down a heating economy. Private consumption mimics response of output growth, whereas response of private investment follows the substitutability hypothesis.
Does inflation asymmetrically affect relative price variability?

( 2014-01-01) Rather, Sartaj Rasool ; Durai, S. Raja Sethu ; Ramachandran, M.

The U-shaped relationship between inflation and price dispersion around nonzero inflation rate is due to the use of aggregate measure of relative price variability (RPV), which amounts to specification errors in a piecewise linear regression models. However, the true underlying relationship between inflation and inflation-induced RPV is found to be U-shaped around zero inflation and inflation seems to have asymmetric impact on price dispersion as predicted by menu cost models. © 2013 Taylor & Francis.