Are Indian Exports and Imports Cointegrated?
10 Pages Posted: 24 Dec 2008
Date Written: December, 22 2008
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: Suggested Citation
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By M. Upender