Do Exchange Rates Affect Exports in India?. (December 2014)

• Record Type: Journal Article
• Authors: Bhattacharyya, Ranajoy; Mukherjee, Jaydeep
• Is Part Of: South Asian journal of macroeconomics and public finance. Volume 3:Number 2(2014:Dec.)
• Page Start: 175
• Page End: 193
• Publication Date: 2014-12
• Subjects: Real exports -- real effective exchange rate -- structural breaks -- unit root -- cointegration; Macroeconomics -- Periodicals; Finance, Public -- Periodicals; Finance, Public -- South Asia -- Periodicals; Economics -- Periodicals; Public Sector -- economics -- Periodicals; 339.0954
• DOI: 10.1177/2277978714548631
• Languages: English
• ISSNs: 2277-9787

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