This study examines static and dynamic causality among sectoral incomes of agriculture, industry, service and the total GDP of India for the period 1950-51 to 2008-09, employing Engle-Granger and Impulse Response and Variance Decomposition framework, respectively. Static causality analysis indicates that the service sector Granger causes industry sector and GDP and, the agriculture sector Granger causes service sector. Dynamic causality results show that contribution to GDP forecast error by the industry sector is the highest, followed by agriculture and service sectors, while the contribution to the industry sector forecast error by GDP is the highest, followed by service sector and agriculture sector. In the case of the service sector, the explanation power of one standard deviation innovation in the industry and agriculture sectors to the forecast error variance is quite high (30.6% and 40%, respectively).
Available at: http://works.bepress.com/aviral_kumar_tiwari/7/