Trade relation between India and other BRICS countries: A multidimensional approach using Gravity Model and Granger Causality
The aim of the study is to explore trade relation between India and other BRICS nations in the short-run as well as in the long-run. For empirical analysis, the study first checks stationary conditions using ADF- Fisher unit root test. To estimate the association between the selected variables, this...
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| Format: | Article |
| Language: | English |
| Published: |
General Association of Economists from Romania
2020-03-01
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| Series: | Theoretical and Applied Economics |
| Subjects: | |
| Online Access: |
http://store.ectap.ro/articole/1437.pdf
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| _version_ | 1819014669129482240 |
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| author | Dr. N. KUBENDRAN |
| author_facet | Dr. N. KUBENDRAN |
| author_sort | Dr. N. KUBENDRAN |
| collection | DOAJ |
| description | The aim of the study is to explore trade relation between India and other BRICS nations
in the short-run as well as in the long-run. For empirical analysis, the study first checks stationary
conditions using ADF- Fisher unit root test. To estimate the association between the selected
variables, this study has applied Pedroni’s cointegration test. After fulfilling the two conditions
(Stationary & cointegration), this study employed Granger Causality Test for short-run impact and
Gravity Model using Dynamic Ordinary Least Square (DOLS) and Fully Modified Ordinary Least
Square (FMOLS) for long-run impact. Granger Causality test results strongly support India’s trade
with other BRICS nations. The study found Bi-Directional Causality between India’s Exports &
other BRICS Imports and No causality between India’s Imports with other BRICS Exports. Also, the
study found favorable unidirectional causality between India’s GDP and other BRICS nation’s
volume of trade. Long-run results from Gravity model using DOLS and FMOLS found highly
significant for the selected variables (GDP, PCGDP, PCGDPD, Exchange Rate, Trade-GDP ratio
and Distance) other than inflation and trade agreement. Except inflation, per capita GDP
differential and distance, all the other variables (GDP, PCGDP, Exchange Rate, Trade-GDP ratio
and Trade Agreement)has positive coefficient to the volume of trade of BRICS nations. Majority of
the selected variables possesses significant and positive relations with the independent variables
clearly indicate that there is a favorable impact on the Indian economy. Finally, the test results
validated the appropriateness of Gravity model for trade. So this study strongly recommended that
India needs to strengthen its trade relation with other BRICS nations by promoting make in India,
SEZs, EOUs and aggravating second generation reforms to reap the potential benefits from the
global economy. |
| first_indexed | 2024-12-21T02:19:31Z |
| format | Article |
| id | doaj.art-99dad1ece72c4db694ee4dd533d1c7b8 |
| institution | Directory Open Access Journal |
| issn | 1841-8678 1844-0029 |
| language | English |
| last_indexed | 2024-12-21T02:19:31Z |
| publishDate | 2020-03-01 |
| publisher | General Association of Economists from Romania |
| record_format | Article |
| series | Theoretical and Applied Economics |
| spelling | doaj.art-99dad1ece72c4db694ee4dd533d1c7b82022-12-21T19:19:11ZengGeneral Association of Economists from RomaniaTheoretical and Applied Economics1841-86781844-00292020-03-01XXVII1415618418678Trade relation between India and other BRICS countries: A multidimensional approach using Gravity Model and Granger CausalityDr. N. KUBENDRAN0 Nmims University, Bangalore Campus, India The aim of the study is to explore trade relation between India and other BRICS nations in the short-run as well as in the long-run. For empirical analysis, the study first checks stationary conditions using ADF- Fisher unit root test. To estimate the association between the selected variables, this study has applied Pedroni’s cointegration test. After fulfilling the two conditions (Stationary & cointegration), this study employed Granger Causality Test for short-run impact and Gravity Model using Dynamic Ordinary Least Square (DOLS) and Fully Modified Ordinary Least Square (FMOLS) for long-run impact. Granger Causality test results strongly support India’s trade with other BRICS nations. The study found Bi-Directional Causality between India’s Exports & other BRICS Imports and No causality between India’s Imports with other BRICS Exports. Also, the study found favorable unidirectional causality between India’s GDP and other BRICS nation’s volume of trade. Long-run results from Gravity model using DOLS and FMOLS found highly significant for the selected variables (GDP, PCGDP, PCGDPD, Exchange Rate, Trade-GDP ratio and Distance) other than inflation and trade agreement. Except inflation, per capita GDP differential and distance, all the other variables (GDP, PCGDP, Exchange Rate, Trade-GDP ratio and Trade Agreement)has positive coefficient to the volume of trade of BRICS nations. Majority of the selected variables possesses significant and positive relations with the independent variables clearly indicate that there is a favorable impact on the Indian economy. Finally, the test results validated the appropriateness of Gravity model for trade. So this study strongly recommended that India needs to strengthen its trade relation with other BRICS nations by promoting make in India, SEZs, EOUs and aggravating second generation reforms to reap the potential benefits from the global economy. http://store.ectap.ro/articole/1437.pdf bricsgravity modelgranger causality modelforeign tradeeconomic integration |
| spellingShingle | Dr. N. KUBENDRAN Trade relation between India and other BRICS countries: A multidimensional approach using Gravity Model and Granger Causality Theoretical and Applied Economics brics gravity model granger causality model foreign trade economic integration |
| title | Trade relation between India and other BRICS countries: A multidimensional approach using Gravity Model and Granger Causality |
| title_full | Trade relation between India and other BRICS countries: A multidimensional approach using Gravity Model and Granger Causality |
| title_fullStr | Trade relation between India and other BRICS countries: A multidimensional approach using Gravity Model and Granger Causality |
| title_full_unstemmed | Trade relation between India and other BRICS countries: A multidimensional approach using Gravity Model and Granger Causality |
| title_short | Trade relation between India and other BRICS countries: A multidimensional approach using Gravity Model and Granger Causality |
| title_sort | trade relation between india and other brics countries a multidimensional approach using gravity model and granger causality |
| topic | brics gravity model granger causality model foreign trade economic integration |
| url |
http://store.ectap.ro/articole/1437.pdf
|
| work_keys_str_mv | AT drnkubendran traderelationbetweenindiaandotherbricscountriesamultidimensionalapproachusinggravitymodelandgrangercausality |