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Exchange Rate and Service Exports from India: A Nonlinear ARDL Analysis

Author

Listed:
  • Manoranjan Sahoo

    (Department of Humanities and Social Sciences, Indian Institute of Technology Madras)

Abstract

Using linear and nonlinear autoregressive and distributed lag (ARDL) models we examine the relationship between real exchange rate and service exports from India by incorporating goods exports, financial development, FDI inflows, world demand and economic globalization during 1975-2015. Linear ARDL results indicate that 1 percent currency appreciation results in a reduction of the service exports by 0.01 percent in the long run. The net effect in the short run is negative and not significant. On the other hand, nonlinear ARDL results show the absence of any significant asymmetric impact of real exchange rate variations on service exports from India both in the short and long run. This implies that the J-curve effect between real exchange rate and service exports does not exist in the Indian context. Our results also show that the impact of supply augmenting factors (such as FDI inflows, financial development, and globalization) and demand-side factors (such as world demand) is more dominant than price effects on service exports.

Suggested Citation

  • Manoranjan Sahoo, 2018. "Exchange Rate and Service Exports from India: A Nonlinear ARDL Analysis," Economics Bulletin, AccessEcon, vol. 38(2), pages 1090-1101.
    • Handle: RePEc:ebl:ecbull:eb-17-00238
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Real exchange rate; service exports; financial development; India; Asymmetries;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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