Open AccessTrade and Economic Growth: The Case of India
Author(s) -
Simran Sethi
Publication year - 2017
Publication title -
pragati: journal of indian economy/pragati : journal of indian economy
Language(s) - English
Resource type - Journals
eISSN - 2395-261X
pISSN - 2347-4432
DOI - 10.17492/pragati.v4i01.9545
Subject(s) - economics , cointegration , granger causality , causality (physics) , johansen test , real gross domestic product , international economics , short run , monetary economics , econometrics , error correction model , international trade , physics , quantum mechanics
The objective of this paper is to investigate the short run as well as long run relationship between GDP, exports and imports for India using annual data from 1982 to 2016. Through this paper, I examine the four main hypotheses regarding the relation between exports, imports and economic growth. The first one is export-led growth hypothesis, the second one is the import-led growth hypothesis, the third one is the growth-led exports and lastly, the growth-led imports hypothesis. The Johansen’s cointegration is used to examine the long term relationship and empirical results indicate that there is a long run relationship between GDP, exports and imports. The short term relationship is measured using the Granger causality test and the statistical results suggest unidirectional causality from GDP to exports and GDP to imports in conformity with the growth-led exports and growth-led imports hypothesis respectively.