Abstract
In this paper, we examine the determinants of bilateral export demand function of India during 1993:Q1-2015:Q1. The starting point of our study is 1993:Q1 by keeping into consideration that RBI implemented market determined managed floating flexible exchange rate system during that period. We have employed Auto Regressive Distributed Lag (ARDL) model by using the macroeconomic variables such as real exports, foreign income, nominal exchange rate (Rupee-Dollar) and relative price. We found there exists a long run equilibrium relationship between real exports, foreign income, exchange rate and relative price. In our empirical analysis, we found that in the long run and short run, real exports are influenced more by foreign income followed by relative price. Foreign income carries a positive sign and is statistically significant, which implies that 1% increase in foreign income will increase real export by 1.63% in the long run. Likewise, relative price carries a negative sign and is statistically significant which implies 1% decrease in relative prices that will increase real exports by 0.22% in the long run. The nominal exchange rate carries a negative sign and is statistically significant (in both short run and long run), which suggests that depreciation of nominal exchange rate would not stimulate the volume of export during our study period. Hence, for policy point of view if any policy makers want to promote exports by depreciating, the rupee will not give fruitful results.
Highlights
IntroductionIndia’s exports to the whole world are showing an increasing trend during the period 1993:Q1 to 2008:Q2
We examine the determinants of bilateral export demand function of India during 1993:Q1-2015:Q1
The nominal exchange rate carries a negative sign and is statistically significant, which suggests that depreciation of nominal exchange rate would not stimulate the volume of export during our study period
Summary
India’s exports to the whole world are showing an increasing trend during the period 1993:Q1 to 2008:Q2. India’s exports have increased by 10 times during this period. India’s exports to the whole world started falling since 2008:Q2 (Figure 1). While exports are falling temporarily in the aftermath of the Global Financial Crisis which started in the USA and gradually spread across the world, the value of exports has remained essentially flat since 2011. It is believed that exports play an important role in the growth of the economy. As India’s exports to the whole world are not showing an increasing trend which forces us to see whether India’s exports to the USA are increasing or not as the USA is the major trading partner of India for a couple of decades
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
