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The Rise and Fall of India's Relative Investment Price: A Tale of Policy Error and Reform
Principal Investigator(s): View help for Principal Investigator(s) Alok Johri, McMaster University
Version: View help for Version V1
| Name | File Type | Size | Last Modified |
|---|---|---|---|
| Documentaion_AEJ_Macro | 07/17/2020 05:21:PM |
Project Citation:
Johri, Alok. The Rise and Fall of India’s Relative Investment Price: A Tale of Policy Error and Reform. Nashville, TN: American Economic Association [publisher], 2020. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2020-07-17. https://doi.org/10.3886/E120319V1
Project Description
Summary:
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India's relative price of investment rose 44% from 1981 to 1991 and fell 26% from 1991 to 2006. We build a simple DGE model calibrated to Indian data in order to explore the impact of capital import substitution policies and their reform post-1991, in accounting for this rise and fall. Our model delivers a 23% rise before reform and a 31% fall thereafter. GDP per effective labor was 3% lower in 1991 compared to 1981 due to import restrictions on capital goods. Their removal and a 71 percentage point reduction in tariff rates raised GDP per effective labor permanently by 20%.
Funding Sources:
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Social Science and Humanities Research Council of Canada (435-2016-0708)
Scope of Project
JEL Classification:
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E17 General Aggregative Models: Forecasting and Simulation: Models and Applications
E20 Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy: General (includes Measurement and Data)
O11 Macroeconomic Analyses of Economic Development
E17 General Aggregative Models: Forecasting and Simulation: Models and Applications
E20 Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy: General (includes Measurement and Data)
O11 Macroeconomic Analyses of Economic Development
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