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Export Instability, Income Terms of Trade Instability and Growth: The Case of India

Author

Listed:
  • Faiz Bilquees

    (Department of Economics, Fatima Jinnah Women University, Rawalpindi, Pakistan)

  • Tahir Mukhtar

    () (Department of Economics, Fatima Jinnah Women University, Rawalpindi, Pakistan)

Abstract

The study explores the causal relationship among export instability, income terms of trade instability and economic growth in India. By using the cointegration test and the vector error correction model for the period 1960 to 2008, the study demonstrates that there exists a long run equilibrium relationship among export instability, income terms of trade instability, investment and economic growth. Both in the short run and the long rum the Granger causal flow is uni-directional from export instability and income terms of trade instability to economic growth and investment. The findings of the study suggest that there is a need to build up foreign exchange reserves in India in order to smoothen out fluctuations in export earnings in the short run. A long run strategy may involve government efforts to diversify export base of the country.

Suggested Citation

  • Faiz Bilquees & Tahir Mukhtar, 2011. "Export Instability, Income Terms of Trade Instability and Growth: The Case of India," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 14(39), pages 25-44, March.
  • Handle: RePEc:rej:journl:v:14:y:2011:i:39:p:25-44
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    File URL: http://www.rejournal.eu/sites/rejournal.versatech.ro/files/articole/2011-03-01/2092/bilquees-mukhtar-je39.pdf
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    References listed on IDEAS

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    1. Masih, Abul M. M. & Masih, Rumi, 1997. "On the temporal causal relationship between energy consumption, real income, and prices: Some new evidence from Asian-energy dependent NICs Based on a multivariate cointegration/vector error-correctio," Journal of Policy Modeling, Elsevier, vol. 19(4), pages 417-440, August.
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    Cited by:

    1. Olajide S. Oladipo, 2017. "Export Instability and Economic Growth in Nigeria: A Time Series Analysis," Research Papers RP_322, African Economic Research Consortium.

    More about this item

    Keywords

    export instability; economic growth; income terms of trade; Granger causality.;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F10 - International Economics - - Trade - - - General
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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