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Do Exchange Rates Affect Exports in India?

Author

Listed:
  • Ranajoy Bhattacharyya

    (Ranajoy Bhattacharyya (corresponding author), Indian Institute of Foreign Trade, Kolkata Campus, Kolkata, India. E-mail: ranajoy@iift.ac.in)

  • Jaydeep Mukherjee

    (Jaydeep Mukherjee, Indian Institute of Foreign Trade, Kolkata, India. E-mail: jaydeepm74@gmail.com)

Abstract

It is shown that the 36 country real effective exchange rate (REER) of India, which is I (1), becomes stationary once a single exogenous shock (corresponding to the implementation of the liberalization policy by the government of India) is separated from its stochastic component and modelled as a break in the deterministic trend. The implication of this for the export supply function is enormous. While without the break real export has a long-run relationship with REER and gross domestic product, with the break the relationship no more exists. JEL Classification: F31, C32, F41

Suggested Citation

  • Ranajoy Bhattacharyya & Jaydeep Mukherjee, 2014. "Do Exchange Rates Affect Exports in India?," South Asian Journal of Macroeconomics and Public Finance, , vol. 3(2), pages 175-193, December.
    • Handle: RePEc:sae:smppub:v:3:y:2014:i:2:p:175-193
    DOI: 10.1177/2277978714548631
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    References listed on IDEAS

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    Cited by:

    1. Ranajoy Bhattacharyya & Bipradas Rit, 2018. "On the Relationship between the Nominal Exchange Rate and Export Demand in India," South Asian Journal of Macroeconomics and Public Finance, , vol. 7(2), pages 260-282, December.
    2. Nayyar, Rishika & Mukherjee, Jaydeep, 2020. "Home country impact on Outward FDI from India," Journal of Policy Modeling, Elsevier, vol. 42(2), pages 385-400.
    3. Atsuyuki Kato, 2022. "Trade Competition Between ASEAN, China, and India: The Post-trade War and COVID-19 Scenario," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 14(2), pages 163-184, May.

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    More about this item

    Keywords

    Real exports; real effective exchange rate; structural breaks; unit root; cointegration;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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