Abstract
This paper examines the influence of global oil market shocks on India’s aggregate, non-oil, and oil trade balances using the structural vector autoregression model. The impulse response analysis suggests that aggregate and non-oil trade balances deteriorate in response to adverse oil-specific demand shocks, while the oil trade balance improves. Among oil market shocks, only oil-specific demand shocks have a significant impact on all trade balance metrics. This research has crucial policy implications for the Indian economy.
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