An Empirical Analysis of the Aggregate Export Demand Function in Post-Liberalization India
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Takeshi Inoue
Abstract
This paper focuses on export growth as an engine of growth and, by estimating India’s export demand function, examines whether and to what extent India’s export trend has been affected by external factors, particularly in the post-liberalization period. The empirical results indicate that all estimated coefficients are statistically significant with expected signs and that the absolute value of the coefficient is the largest for the world price, followed by world income and domestic income. Our results reveal that price competitiveness has improved India’s export market. Moreover, the statistically significant world income elasticity suggests that the global economic boom may contribute to an increase in India’s exports, whereas the global recession has likely had an adverse impact on the Indian economy through its trade channel. To ensure that export expansion becomes a stable contributor to economic growth, the Indian government should pursue ongoing diversification in exports in terms of both commodities and markets.
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- 1
A common feature in these recent studies is that the sample period includes the period from 2000 onward. Sharma and Panagiotidis (2005) and Shirazi and Manap (2005) are also part of the relatively recent literature on the relationship between economic growth and export expansion in India. Unlike most researchers, however, Sharma and Panagiotidis (2005) find little evidence to support the export-led growth hypothesis. Shirazi and Manap (2005) find no causality between exports and output for India.
- 2
For a comprehensive survey on the export demand function, see Sawyer and Sprinkle (1999).
- 3
In addition, RBI (2004) and Sarkar (2006) have quantitatively analyzed India’s export demand function.
- 4
Following Arize (1990, 2001), we assume that exchange rates are introduced indirectly in eq. [1] by expressing all monetary variables in common dollar units.
- 5
These trading partner countries account, on average, for about one-third of India’s total exports during the period 1992–2011.
©2014 by Walter de Gruyter Berlin / Boston
Articles in the same Issue
- Frontmatter
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- Do Remittances Attract Foreign Direct Investment? An Empirical Investigation
- Does the Presence of Multinational Corporations Affect a Country’s Gross Domestic Product?
- Assessing the Effect of the Consumer-Voter Sentiment on Tiebout-Like Migration: The EU 27 Case
- Trade Liberalization and Culture
- What’s News
- An Empirical Analysis of the Aggregate Export Demand Function in Post-Liberalization India
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Articles in the same Issue
- Frontmatter
- Articles
- Do Remittances Attract Foreign Direct Investment? An Empirical Investigation
- Does the Presence of Multinational Corporations Affect a Country’s Gross Domestic Product?
- Assessing the Effect of the Consumer-Voter Sentiment on Tiebout-Like Migration: The EU 27 Case
- Trade Liberalization and Culture
- What’s News
- An Empirical Analysis of the Aggregate Export Demand Function in Post-Liberalization India
- Evolving Domestic Bond Markets and Financial Deepening in Asia
- When Do Currency Unions Increase Trade?
