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Are Indian Exports And Imports Cointegrated?

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  • KONYA, Laszlo

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  • SINGH, Jai Pal

Abstract

The purpose of this study is to investigate empirically the presence of an equilibrium relationship between the logarithms of Indian exports and imports between 1949/50 and 2004/2005, using the unit-root, cointegration approach. To ascertain robustness, exports and imports measured in current prices but in two currencies, Indian rupee and US dollar have been analyzed. Moreover, since the sample comprises data from both the fixed and freely floating exchange rate periods, the tests have also been performed allowing for a one-time structural break in 1992/93. The results indicate no-cointegration between exports and imports. The lack of cointegration means that Indian macroeconomic policies have been ineffective in bringing exports and imports into long-run equilibrium and India is in violation of her international budget constraint.

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Bibliographic Info

Article provided by Euro-American Association of Economic Development in its journal Applied Econometrics and International Development.

Volume (Year): 8 (2008)
Issue (Month): 2 ()
Pages: 177-186

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Handle: RePEc:eaa:aeinde:v:8:y:2008:i:2_14

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Related research

Keywords: Export; Import; Cointegration; India;

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References

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  1. Manuchehr Irandoust & Johan Ericsson, 2004. "Are Imports and Exports Cointegrated? An International Comparison," Metroeconomica, Wiley Blackwell, vol. 55(1), pages 49-64, 02.
  2. Guisan, M.C., 2004. "Human Capital, Trade and Development in India, China, Japan and other Asian Countries, 1960-2002: Econometric Models and Causality Tests," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 4(3), pages 123-139.
  3. Dierk Herzer & Nowak-Lehmann Felicitas, 2006. "Is there a long-run relationship between exports and imports in Chile?," Applied Economics Letters, Taylor & Francis Journals, vol. 13(15), pages 981-986.
  4. Irandoust Manuchehr & Sjoo Boo, 2000. "The Behavior of the Current Account in Response to Unobservable and Observable Shocks," International Economic Journal, Taylor & Francis Journals, vol. 14(4), pages 41-57.
  5. Mohsen Bahmani-Oskooee & Hyun-Jae Rhee, 1997. "Are Imports and Exports of Korea Cointegrated?," International Economic Journal, Taylor & Francis Journals, vol. 11(1), pages 109-114.
  6. Hakkio, Craig S & Rush, Mark, 1991. "Is the Budget Deficit "Too Large?"," Economic Inquiry, Western Economic Association International, vol. 29(3), pages 429-45, July.
  7. Husted, Steven, 1992. "The Emerging U.S. Current Account Deficit in the 1980s: A Cointegration Analysis," The Review of Economics and Statistics, MIT Press, vol. 74(1), pages 159-66, February.
  8. Tuck Cheong Tang, 2006. "Are Imports And Exports In The Oic Member Countries Cointegrated? A Reexamination," IIUM Journal of Economics and Management, IIUM Journal of Economis and Management, vol. 14(1), pages 49-79, December.
  9. Paresh Kumar Narayan & Seema Narayan, 2005. "Are exports and imports cointegrated? Evidence from 22 least developed countries," Applied Economics Letters, Taylor & Francis Journals, vol. 12(6), pages 375-378.
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Cited by:
  1. Abdulla S. Al-Khulaifi, 2013. "Exports and Imports in Qatar: Evidence from Cointegration and Error Correction Model," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 3(9), pages 1122-1133, September.
  2. Tiwari, Aviral, 2010. "Is trade deficit sustainable in India? An inquiry," MPRA Paper 24451, University Library of Munich, Germany.
  3. Nag, Biswajit & Mukherjee, Jaydeep, 2012. "The sustainability of trade deficits in the presence of endogenous structural breaks: Evidence from the Indian economy," Journal of Asian Economics, Elsevier, vol. 23(5), pages 519-526.
  4. KHOKHAR, Joga Singh, 2010. "Will India’S Trade Deficit Ever Converge To Zero?- An Application Of Bounds Testing Approach To Co-Integration," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 10(1).

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