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The Validity of J-Curve: India Versus BRICS Countries: A Panel Cointegration Approach

In: Trade, Investment and Economic Growth

Author

Listed:
  • Ganapati Mendali

    (Anchalik Kishan College)

Abstract

Countries resort to devaluation (i.e., reducing the value of a home currency concerning foreign currency) to improve the balance of trade. However, deterioration of trade balance is found only in the short run when a nation goes for devaluing its currency. Conversely, the devaluing nation experiences an improvement in the balance of trade in the long run. This deterioration of trade balance first and improvement latter resembles the letter J and branded as the J-curve hypothesis. The objective of this paper is to study the strength of the J-curve of India with BRICS countries from 2011m1 to 2017m6. By utilizing some panel cointegration methods, it shows that the effect of devaluing Indian currency, i.e., Indian Rupee, differs across countries under study. There is no evidence of J-curve found in India.

Suggested Citation

  • Ganapati Mendali, 2021. "The Validity of J-Curve: India Versus BRICS Countries: A Panel Cointegration Approach," Springer Books, in: Pooja Lakhanpal & Jaydeep Mukherjee & Biswajit Nag & Divya Tuteja (ed.), Trade, Investment and Economic Growth, chapter 0, pages 57-71, Springer.
    • Handle: RePEc:spr:sprchp:978-981-33-6973-3_4
    DOI: 10.1007/978-981-33-6973-3_4
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    More about this item

    Keywords

    Exchange rate; J-curve; Panel cointegration; FMOLS; BRICS;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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