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Testing J-curve hypothesis and analysing the effect of exchange rate volatility on the balance of trade in India

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  • Tarlok Singh

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Abstract

This study estimates the balance of trade model similar to Rose (1991) to test the J-curve hypothesis and analyse the effect of conditional exchange rate volatility on the balance of trade in India. The model is estimated on quarterly data from 1975:02 to 1996:03 and the exchange rate is measured alternatively in terms of the trade and export weighted real effective exchange rate. The model variables are tied together in a long run equilibrium relationship. The study does not find any evidence for the presence of the J-curve effect in the balance of trade. The study finds the presence of weak ARCH but strong GARCH effects in the exchange rate series. But this exchange rate volatility does not play any significant role in affecting the balance of trade in India. Copyright Springer-Verlag 2004

Suggested Citation

  • Tarlok Singh, 2004. "Testing J-curve hypothesis and analysing the effect of exchange rate volatility on the balance of trade in India," Empirical Economics, Springer, vol. 29(2), pages 227-245, May.
  • Handle: RePEc:spr:empeco:v:29:y:2004:i:2:p:227-245
    DOI: 10.1007/s00181-003-0162-8
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    File URL: http://hdl.handle.net/10.1007/s00181-003-0162-8
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    Citations

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    Cited by:

    1. Vikas Gautam & Suresh K G & Aviral Kumar Tiwari, 2013. "Impact Of Real Exchange Rates On Exports Of Agricultural Commodities: Evidence From India," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 11, pages 46-58, June.
    2. Yi-Bin Chiu & Chia-Hung Sun, 2009. "Economic interdependence and bilateral trade imbalance across the Taiwan Strait," Journal of Economic Studies, Emerald Group Publishing, vol. 36(4), pages 411-432, September.
    3. Kyophilavong, Phouphet & Shahbaz, Muhammad & Uddin, Gazi Salah, 2013. "Does J-curve phenomenon exist in case of Laos? An ARDL approach," Economic Modelling, Elsevier, vol. 35(C), pages 833-839.

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