Assistant Professor, Department of Business Administration, Xxxxxxxxxx
West Bengal University of technology
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India, a developing economy contains trade deficit from its very inception. The main objective of the study is to portray some characteristics of India’s trade in pre liberalization (1951-1991) and post liberalization (1991-2008) period walk in total export and import time series. Author attempt to understand the time series behavior of total export and import of India. Unit root tests recognize the existence of random walk. Johansen co integration test reveals long-run equilibrium relationship between these two variables. Getting the existence of co integration, the study attempts to find a causal relationship by using error correction mechanism. Additionally Unit root test is employed to examine the existence of stationarity in the given time series. Ultimate Test results expose bidirectional long term causality and unidirectional short term causality between imports - exports of India. Findings of the study corroborate that India is unable to violate of its international budget constraints. Keywords: Stationary, Co integration, Export, Import, Causality, ECM estimation JEL Classification: G1, G3
International trade is the basic activity by which a country establishes its economic relationship with other countries. At present, liberalization of trade is a common phenomenon for most countries. Liberalization of trade policy significantly came into being in India from 1991. Whatever is the concentration for liberalization, all the countries put extensive concern for gaining trade balance. A country’s trade volume reflects the collective effects of other macroeconomic policies. To investigate collective effect of many policies on international trade, one can look for the long-run equilibrium relationship between export and import. Investigation regarding Bangladesh’s export and import from time series perspective is not a new affair. But, as time moves on, researchers get continuously increasing room for analyzing time series behavior. So, researcher undertake investigation of time series behavior of Indian imports and exports considering all fiscal years (1951-52) to 2003-04) of independent India. Trade volume surely has effects of time as import and export demand of a country does not change overnight. Therefore, understanding time series behavior of trade volume can be insightful for trade policy analysis. In this connection, the study of time series behavior of trade volume has gathered weight in macroeconomic research. During literature review several investigations are accompanied relating to India from the viewpoint of time series econometrics; such as Anam and Rahman (1991), Bhuiyan and Rashid (1993), Hossain (2000, 2001, 2003), Yilmaz and Verma (1995), Hossain (2005, 2006), Uddin et al (2008). The use of time series analysis, searching for random walk and cointegration, is extensive in macroeconomic literature. I outline some of those relating to trade and macroeconomic indicators, as Husted (1992), Powell (1991), Cuddington and Urza (1989), Deaton and Laroque (1989), Grilli and Yang (1988), Cochrane (1988). Now, I am presenting the findings of some trade related studies available in the literature. Bahmani-Oskooee and Rhee (1997) found co integration between exports and imports of South Korea. Bahmani-Oskooee (1998) used cointegration approach to find out the long run trade elasticities in least developed countries (LDCs). Tang (2006) studied cointegrating relationship between exports and imports of 27 selected Organization of the Islamic Conference (OIC) member countries. The study found cointegrating relationship between exports and imports of Bangladesh, Cameroon, Chad,...