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Effect of Exchange Rate Volatility on Exports: An Empirical Analysis of Disaggregated Data of the Indian Manufacturing Sector

Author

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  • * Jyoti
  • K. N. Bhatt

Abstract

The effect of real exchange rate volatility on real exports is explored empirically in this article. The study uses disaggregated Indian manufacturing sector data consisting of seven categories: leather & leather manufactures, chemicals and related products, engineering goods, electronic goods, textiles (excluding readymade garments), readymade garments and other manufactured goods. The analysis is focused on India’s quarterly data from 2004Q2 to 2018Q2 using the ARDL bound test procedure. The ARDL bound test results show that real exports are co-integrated with fluctuations in real exchange rates and world real GDP. The study also reveals that exchange rate volatility has mixed effects on manufacturing exports both in the long run and short run. The impact of real-world GDP (WGDP) on real exports has been found positive and significant in the long run except for leather and leather manufacturers where it is negative and significant. In the case of the short-run, real-WGDP has mixed effects on exports. JEL Classification: C22, F14, F31, F1

Suggested Citation

  • * Jyoti & K. N. Bhatt, 2024. "Effect of Exchange Rate Volatility on Exports: An Empirical Analysis of Disaggregated Data of the Indian Manufacturing Sector," Arthaniti: Journal of Economic Theory and Practice, , vol. 23(2), pages 244-268, December.
    • Handle: RePEc:sae:artjou:v:23:y:2024:i:2:p:244-268
    DOI: 10.1177/09767479221117320
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    More about this item

    Keywords

    ARDL; Cointegration; Exchange rate volatility; Exports;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F1 - International Economics - - Trade

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