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India’s Bilateral Export Growth and Exchange Rate Volatility: A Panel GMM Approach

In: Macroeconometric Methods

Author

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  • Pami Dua

    (University of Delhi)

  • Ritu Suri

    (Lakshmibai College, University of Delhi)

Abstract

This paper empirically examines the effect of real exchange rate volatility on India’s bilateral export growth. Additionally, we examine the impact of exchange rate volatility on growth in India’s exports to developed and developing countries. For this purpose, we utilize panel data of India’s twelve export trading partners, six developed (US, Hong Kong, Singapore, EZ, UK, Japan) and six developing countries (China, Indonesia, Brazil, South Africa, Malaysia and Thailand) from 2005 Q2 to 2019 Q2. We utilize panel GMM-IV technique to estimate a ‘hybrid model’ for India’s export growth. Our findings suggest that while real exchange rate volatility significantly decreases growth in India’s exports to developing countries, it has an insignificant impact on growth in India’s exports to developed countries. However, the overall effect of exchange rate volatility upon India’s export growth is found to be insignificant. Further, while we find that growth in India’s exports to both developed and developing economies is positively affected by growth in real exchange rate, foreign income, domestic income and infrastructure, it is negatively influenced by domestic demand. Our findings indicate that both demand and supply-side factors are crucial for India’s export growth.

Suggested Citation

  • Pami Dua & Ritu Suri, 2023. "India’s Bilateral Export Growth and Exchange Rate Volatility: A Panel GMM Approach," Springer Books, in: Pami Dua (ed.), Macroeconometric Methods, chapter 0, pages 123-148, Springer.
    • Handle: RePEc:spr:sprchp:978-981-19-7592-9_6
    DOI: 10.1007/978-981-19-7592-9_6
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    More about this item

    Keywords

    Export growth in India; Exchange rate; Panel GMM-IV;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F18 - International Economics - - Trade - - - Trade and Environment
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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