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Are exports and imports of India’s trading partners cointegrated? Evidence from Fourier bootstrap ARDL procedure

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  • Khyati Kathuria

    (Delhi Technological University)

  • Nand Kumar

    (Delhi Technological University)

Abstract

The paper assesses the long-run relationship between India’s exports and imports with its 21 major trading partners using bootstrap autoregressive distributed lag bounds test procedure with a Fourier function. The study uses monthly data for the period 2014 (Month 01) to 2020 (Month 02). The empirical results show cointegration for 6 countries if imports are used as the dependent variable but not when exports are used as a dependent variable. However, for the remaining countries, no cointegration between exports and imports was found. This indicates that India’s efforts to reduce its bilateral imbalances through trade policies with these countries may not be appropriately targeted. Having established a long-run relationship, the study estimates a disaggregated bilateral import demand function by employing a linear and nonlinear autoregressive distributed lag model to investigate the asymmetric impact of the relative price changes on the import demand of India with her trading partners. Marshall–Lerner condition is satisfied for India’s trade with Kuwait and Germany in case of linear autoregressive distributed lag model and with Qatar, Kuwait and Germany in case of nonlinear autoregressive distributed lag model. Cumulative asymmetries are established for Indo-Kuwait trade.

Suggested Citation

  • Khyati Kathuria & Nand Kumar, 2022. "Are exports and imports of India’s trading partners cointegrated? Evidence from Fourier bootstrap ARDL procedure," Empirical Economics, Springer, vol. 62(3), pages 1177-1191, March.
    • Handle: RePEc:spr:empeco:v:62:y:2022:i:3:d:10.1007_s00181-021-02061-z
    DOI: 10.1007/s00181-021-02061-z
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    More about this item

    Keywords

    Fourier Bootstrap ARDL; Cointegration; Degenerate cases; Exports; Imports;
    All these keywords.

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • 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
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

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