Are Indian Exports and Imports Cointegrated?

10 Pages Posted: 24 Dec 2008

See all articles by Laszlo Konya

Laszlo Konya

La Trobe University - School of Economics

Jai Pal Singh

Shri Mata Vaishno Devi University (SMVDU-India)

Date Written: December, 22 2008

Abstract

The purpose of this study is to investigate empirically the presence of an equilibrium relationship between the logarithms of Indian exports and imports between 1949/50 and 2004/2005, using the unit-root, cointegration approach. To ascertain robustness, exports and imports measured in current prices but in two currencies, Indian rupee and US dollar have been analyzed. Moreover, since the sample comprises data from both the fixed and freely floating exchange rate periods, the tests have also been performed allowing for a one-time structural break in 1992/93. The results indicate no-cointegration between exports and imports. The lack of cointegration means that Indian macroeconomic policies have been ineffective in bringing exports and imports into long-run equilibrium and India is in violation of her international budget constraint.

Keywords: Export, Import, Cointegration, India

JEL Classification: C22, C32, F14, O24

Suggested Citation

Konya, Laszlo and Singh, Jai Pal, Are Indian Exports and Imports Cointegrated? (December, 22 2008). Applied Econometrics and International Development, Vol. 8, No. 2, 2008, Available at SSRN: https://ssrn.com/abstract=1319420

Laszlo Konya (Contact Author)

La Trobe University - School of Economics ( email )

Bundoora, Victoria 3086
Australia

Jai Pal Singh

Shri Mata Vaishno Devi University (SMVDU-India)

Shri Mata Vaishno Devi University Campus
Sub-Post Office
Katra, Jammu and Kashmir 182320
India

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