Journal of Applied Finance & Banking

Causal Nexus between Fiscal Deficit and Economic Growth in Odisha: An Empirical Investigation

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• Abstract

  This paper examines the relationship between fiscal deficit and economic growth for the period 1950-51 to 2014-15 in case of Odisha. The empirical result of Johansen-Juseilius cointegration approach established the long run association between fiscal deficit and economic growth and through VECM model we conclude unidirectional causality that runs from fiscal deficit to economic growth both in the short run and long run. This empirical finding goes in favor of Keynesian school of thought. It is recommended to implement a suitable deficit management policy to achieve sustained economic growth with stability in Odisha.