Sectoral Volatility and National Output Fluctuations in Indian Economy: An ARCH and GARCH Approach

摘要

The study empirically investigated the impact of sectoral volatility on the economic growth of India using annual time series data for the years 1970-2011. It is attempted to find out that to what extant volatility in economic growth rate of India is associated with volatility in growth rate of different sectors. ADF unit root test is used to check the stationarity of the data. Autoregressive Conditional Heteroscedasticity (ARCH) and General Autoregressive Conditional Heteroscedasticity (GARCH) have been used for estimating the volatility in growth rate of GDP and sectors. To see the impact of sectoral volatility on economic growth rate Ordinary Least Square (OLS) has been used. Finally to estimate the stability of the model Cumulative Sum (CUSUM) and Cumulative Sum of Square (CUSUMSQ) tests have been employed. The results explain the existence of volatility in economic growth rate to a greater extent. The agriculture sector, exports and imports also fluctuate to a greater extent. The results have also shown that lagged period of growth rate of output, agricultural sector as well as services sector affects the current period’s growth rate of output. Furthermore, the results revealed that volatility in services sector contributes highest towards volatility in economic growth rate as compared to other sectors and volatility in exports sector influence the economic growth fluctuations negatively.