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Demand and Supply Factors in the Determination of India's Disaggregated Manufactured Exports: A Simultaneous Error-Correction Aprroach

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  • Sinha Roy, Saikat

Abstract

This paper is an investigation of the demand and supply factors underlying the long-term behaviour of India’s disaggregated manufactured exports. Broadly, there are two divided views on India’s export behaviour: while the predominant view stresses the importance of supply and policy related factors, other studies find the significance of world demand in export determination. The issue is more important than empirical estimation of determinants of exports; it is theoretically motivated as India has been able to expand exports across sectors in tandem with changes in trade regimes. However, the fact of varying export growth across different sector does not lend support to the observation that only policies explain export performance, rather it highlights the importance of other demand and supply factors at the sectoral level. An imperfect substitutes demand-supply model of export determination is set out and the model is estimated in an error-correction framework using systems method. The model explains behaviour of disaggregated exports well. It shows the importance of demand as well as supply effects in the determination of India’s disaggregated exports except textiles and garments.

Suggested Citation

  • Sinha Roy, Saikat, 2007. "Demand and Supply Factors in the Determination of India's Disaggregated Manufactured Exports: A Simultaneous Error-Correction Aprroach," MPRA Paper 68589, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:68589
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    File URL: https://mpra.ub.uni-muenchen.de/68589/1/MPRA_paper_68589.pdf
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    References listed on IDEAS

    as
    1. Athukorala, Premachandra & Riedel, James, 1994. "Demand and Supply Factors in the Determination of NIE Exports: A Simultaneous Error-Correction Model for Hong Kong: A Comment," Economic Journal, Royal Economic Society, vol. 104(427), pages 1411-1414, November.
    2. Muscatelli, V A & Srinivasan, T G & Vines, D, 1992. "Demand and Supply Factors in the Determination of NIE Exports: A Simultaneous Error-Correction Model for Hong Kong," Economic Journal, Royal Economic Society, vol. 102(415), pages 1467-1477, November.
    3. Prema-Chandra Athukorala & James Riedel, 1996. "Modelling NIE exports: Aggregation, quantitative restrictions and choice of econometric methodology," Journal of Development Studies, Taylor & Francis Journals, vol. 33(1), pages 81-98.
    4. Holly, Sean & Wade, Keith, 1991. "UK Exports of Manufactures: The Role of Supply Side Factors," Scottish Journal of Political Economy, Scottish Economic Society, vol. 38(1), pages 1-18, February.
    5. Muscatelli, Vito Antonio & Srinivasan, T G & Vines, David, 1992. "Demand and Supply Factors in the Determination of NIE Exports: A Simultaneous Error-Correction Model for Hong Kong Exports," CEPR Discussion Papers 671, C.E.P.R. Discussion Papers.
    6. repec:wsi:wschap:9789814749589_0002 is not listed on IDEAS
    7. Muscatelli, Vito Antonio & Hurn, A Stan, 1992. " Cointegration and Dynamic Time Series Models," Journal of Economic Surveys, Wiley Blackwell, vol. 6(1), pages 1-43.
    8. Michael Funke & Sean Holly, 1992. "The determinants of West German exports of manufactures: An integrated demand and supply approach," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 128(3), pages 498-512, September.
    9. Morris Goldstein & Mohsin S. Khan, 2017. "The Supply and Demand for Exports: A Simultaneous Approach," World Scientific Book Chapters,in: TRADE CURRENCIES AND FINANCE, chapter 2, pages 83-104 World Scientific Publishing Co. Pte. Ltd..
    10. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 39(3), pages 106-135.
    11. Jagdish N. Bhagwati & T. N. Srinivasan, 1975. "Foreign Trade Regimes and Economic Development: India," NBER Books, National Bureau of Economic Research, Inc, number bhag75-1, June.
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    More about this item

    Keywords

    Disaggregated manufactured exports; imperfect substitutes demand-supply model; simultaneous error-correction mechanism; price responsiveness of exports; world demand.;

    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
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy

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