ARTÍCULO
TITULO

Original Sin, Currency Depreciation and External Debt Burden: Evidence from India

Blessy Augustine    
Lakshmi Kumar    

Resumen

Indian Rupee has depreciated around 50 percent against the US Dollar for the last two decades. This depreciating trend generally doesn?t call for any policy interventions as the conventional theories state that it is advantageous for the domestic economy through the competitiveness effect. However, depreciation is expected to increase the external debt burden when the country borrows abroad in foreign currency. At present more than 63 percent of India?s external debt is foreign currency-denominated. Given this, the ramifications of a depreciating rupee through the balance sheet channel invite greater attention. This paper makes an attempt to understand the impact that a depreciating Indian Rupee will have on India?s external debt dynamics. To this end, we estimated an Autoregressive Distributed Lag (ARDL) model using quarterly data for the period 2001-2018. The empirical evidence shows that the depreciation of rupee increases external indebtedness significantly. In the short run, one rupee depreciation increases external debt to GDP ratio by 0.75 percent while in the long run, the increase is 1.26 percent. The study also finds a causal link between external debt and economic growth in the Indian context, which makes the depreciation - debt valuation problem highly relevant.Keywords: External debt, Original Sin, Balance sheet effect, Exchange rate depreciation, IndiaJEL Classifications: F30, F34, H63, H87DOI: https://doi.org/10.32479/ijefi.9487

 Artículos similares

       
 
Amjad S. Qwader,Sulieman D. Aloshaibat     Pág. 88 - 96
This study aims to identify the role of the main components of the public budget for influencing public debt in Jordan through an econometric study. In particular, the EViews 9 program is applied to the annual time series of public debt, current expendit... ver más

 
Obi Chineze Eunice, Imo G. Ibe     Pág. Page:1 - 20Abstract

 
Minhaj ud-Din,Muhammad Azam Khan,Muhammad Tariq     Pág. 235 - 246

 
Mohammed Jerbeen,Faisal Alnori     Pág. 174 - 186
This study investigates the impact of the geographical location of firms? headquarters on the capital structure decisions of listed non-financial firms in Saudi Arabia. In examining this, we compare the leverage levels among firms ,which their headquarte... ver más

 
Marios Psychalis,Panagiotis Gournas,Nagia Grigorakou,Petros Dimitrakopoulos,George Stivachtis     Pág. 18 - 24
This paper aims at examining whether reforms in EU economic and fiscal governance between the period starting from 2010 and ending on 2018 have increased the Gross Domestic Product growth rate in Greece and Portugal. Reforms occurred, such as ?Six Pack?,... ver más