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Budget 2023, Financial Markets and Keynes on Interest Rates: A Study of Short-term Reactions

Indian Journal of Industrial Relations

Volume 59 Issue 1

Published: 2023
Author(s) Name: Satya Prasad Padhi | Author(s) Affiliation: Department of Economics, Punjab University, Chandigarh.
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Abstract

Imports can generate external economies for a robust domestic resurgence in an import-led development regime, and budgetary provisions, particularly higher budgeted capex spending, can amplify these economic signals. This may encourage greater domestic investment, which may be correlated with greater domestic real savings (capabilities). However, the short-term reactions of the bond and stock markets reveal that budget signals have not had much of an impact and the financial markets expect the pre-budget growth trajectory. The current study argued that these issues have arisen as a result of the persistence of a high interest rate policy that disregards broader involvement in growth and domestic capacities (and real savings). As a result, financial markets become speculative and capital flows are cautious.

Keywords: N.A.

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