Abstract
This study aims to find out the relationship between the trends of various exchange rates and the trend of imports on Sri Lankan empirical context. The quantitative method is used by using the time series data in this study. The annual time series data used in this study are collected from the annual report of Central Bank of Sri Lanka for the time periods from year 1950 to year 2017. The multiple regression model is used to find out the impact of the independent variables such as Indian Rupees, Japanese Yen, Pound Sterling, and US Dollar on the dependent variable such as imports of Sri Lanka. The Granger Causality Test is used to find out the causal relationship among all the variables. The Johansen Co-Integration Test is used to find out long run equilibrium relationship among the variables. Pound Sterling of United Kingdom and Dollar of United Statesare positively impacts on the Imports of Sri Lanka. Indian Rupees and Japanese Yen are inversely associated with the imports. According to the Granger Causality Test, one way causal relationship is found between the currencies such as Indian Rupees, Japanese Yen, Pound Sterling, and US Dollar and the imports. The results of Johansen Co-integration Test vividly ensure the long run equilibrium relationship of the variables and the movement of all the variables together in the long run equilibrium. Paradox is recommended to be named as Import Paradox of Pound- Dollar. The structural breakpoint is found in year 2009 which is the year of cease-fire in Sri Lanka.
Highlights
The currency depreciation and appreciation of the domestic countries all over the world are seriously perceived by the respective governments and the persons connected with the international business in terms of their domestic products, exports, imports, and so on
As per the above estimated multiple regression model (4), the currencies such as Indian Rupees and Japanese Yen are inversely associated with the imports over the empirical time period of 66 years in the Sri Lankan context
The increase of one percent in Japanese Yen causes to decrease the imports of Sri Lanka by 0.16 percent whereas the increase of one percent in Pound Sterling makes the imports of Sri Lanka to be increased by 0.3 percent
Summary
The currency depreciation and appreciation of the domestic countries all over the world are seriously perceived by the respective governments and the persons connected with the international business in terms of their domestic products, exports, imports, and so on. The objective of this study is to find out the association-ship between the changes in the various exchange rates of the currencies in terms of the value of Sri Lankan currency and the rupees values of imports of Sri Lanka. In the arena of international trade in the context of Sri Lanka, the trade balance of Balance of Payment is influenced by the variations in the value of exchange rate of the respective currencies in terms of the value of Sri Lankan currency. It is significant to find out the relationship between the changes in the value of foreign currencies in terms of Sri Lankan currency value. The null hypothesis of “there is no relationship between the values of the different foreign currencies and the value of Sri Lankan currency value” is directly derived from the objective of this study
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