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Asymmetric effects of exchange rate movements on traditional and modern services exports: Evidence from a large emerging economy

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  • Manoranjan Sahoo
  • M. Suresh Babu
  • Umakant Dash

Abstract

The service sector in India has emerged as the ‘new engine of growth’ with an increasing share in output and exports. In this paper we analyse the effect of real exchange rate movements on service exports of India, incorporating goods exports, financial development, FDI inflows, world demand and the role of globalization as drivers. We find that while traditional service exports are negatively and significantly affected by the real exchange rate movements, the modern service exports are negatively but not significantly affected. By applying the asymmetric cointegration approach, the results also confirm the non-existence of any asymmetric relationship between the real exchange rate and service exports in India. Further, the results also show that the supply augmenting and demand-side factors are more dominant than the exchange rate to affect service exports from India.

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  • Manoranjan Sahoo & M. Suresh Babu & Umakant Dash, 2019. "Asymmetric effects of exchange rate movements on traditional and modern services exports: Evidence from a large emerging economy," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 28(4), pages 508-531, May.
    • Handle: RePEc:taf:jitecd:v:28:y:2019:i:4:p:508-531
    DOI: 10.1080/09638199.2018.1561744
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    Cited by:

    1. Prica, Ivana & Bartlett, Will, 2019. "Digital infrastructure and services trade in the CEFTA region," LSE Research Online Documents on Economics 117483, London School of Economics and Political Science, LSE Library.

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