<abstract xmlns="http://www.w3.org/1999/xhtml">

<p>The present study investigates trade balance determinants in post-liberalization India from 1991 to 2020. The main aim of this study is to test the validity of the J-curve and Marshal-Lerner condition and examine the impact of other related macroeconomic variables, including foreign income, exchange rate, domestic prices, and domestic demand on the country’s trade balance. To achieve this objective, bounds tests and error correction model within asymmetric and symmetrical framework was used for estimation. In addition, variance decomposition analysis was applied to examine the dynamic interaction of selected variables. The results indicate the absence of the ‘J-curve’ effect and ‘Marshall-Lerner’ condition in India. Further, the results indicate that domestic prices, domestic demand, and money supply have negative signs, whereas exchange rate and world demand have positive signs in the long and short-run. The results from the variance decomposition indicate that as compared to other variables, the exchange rate highly contributes to forecasting error variance of trade balance in the case of India</p>
</abstract>

The present study investigates trade balance determinants in post-liberalization India from 1991 to 2020. The main aim of this study is to test the validity of the J-curve and Marshal-Lerner condition and examine the impact of other related macroeconomic variables, including foreign income, exchange rate, domestic prices, and domestic demand on the country’s trade balance. To achieve this objective, bounds tests and error correction model within asymmetric and symmetrical framework was used for estimation. In addition, variance decomposition analysis was applied to examine the dynamic interaction of selected variables. The results indicate the absence of the ‘J-curve’ effect and ‘Marshall-Lerner’ condition in India. Further, the results indicate that domestic prices, domestic demand, and money supply have negative signs, whereas exchange rate and world demand have positive signs in the long and short-run. The results from the variance decomposition indicate that as compared to other variables, the exchange rate highly contributes to forecasting error variance of trade balance in the case of India

Determinants of the Trade Balance in India. Evidence from a Post-Liberalisation Period

parraywaseem.scholar@kashmiruniversity.net

Studia Universitatis „Vasile Goldis” Arad – Economics Series

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

The present study investigates trade balance determinants in post-liberalization India from 1991 to 2020. The main aim of this study is to test the validity of...

Determinants of the Trade Balance in India. Evidence from a Post-Liberalisation Period

Published Online: Oct 08, 2022

Page range: 16 - 37

Received: Jan 01, 2022

Accepted: Apr 01, 2022

DOI: https://doi.org/10.2478/sues-2022-0017

Keywords
Trade balance, Exchange rate, J-curve, ARDL, NARDL

© 2022 Waseem A. Parray et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Determinants of the Trade Balance in India. Evidence from a Post-Liberalisation Period

Published Online: Oct 08, 2022

Page range: 16 - 37

Received: Jan 01, 2022

Accepted: Apr 01, 2022

DOI: https://doi.org/10.2478/sues-2022-0017

KeywordsTrade balance, Exchange rate, J-curve, ARDL, NARDL

© 2022 Waseem A. Parray et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Keywords
Trade balance, Exchange rate, J-curve, ARDL, NARDL