Some dynamic macroeconomic perspectives for India’s economic growth

Purpose The purpose of this paper is to study impacts of changes in crude oil price, money supply, fiscal deficit and effective exchange rate on India’s economic growth (expressing all variables in real term). Design/methodology/approach First, a simple macroeconomic model is formulated to this effect. Next, linear autoregressive distributed lag procedure and vector error-correction model are applied for growth empirics. Annual data are used from 1977 through 2015. Findings Rises in real crude oil price and monetized real fiscal deficits have negative short-run and long-run effects on real economic growth. Increase in real money supply and real effective exchange rate appreciation helps promote real economic growth in both short run and long run. In all cases, there is evidence of net interactive positive feedback effects among the variables in the short run. Real effective exchange rate appreciation dampens exports, but it is helpful to imports of capital goods and crude oil that contribute to economic growth. So, the net effect on the economy may be conjecturally positive. Originality/value To the best of the authors’ knowledge, this paper is unique because of the formulation of macro-economic model pertaining to the topic and its subsequent empirical verification. Moreover, this paper seems more comprehensive than some other studies, cited in the literature review.

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Econometric Analysis of Determinants of Real Effective Exchange Rate in Nigeria (1960-2015)

Timisoara Journal of Economics and Business ◽

10.1515/tjeb-2016-0005 ◽

2016 ◽

Vol 9 (1) ◽

pp. 62-80 ◽

Cited By ~ 1

Author(s):

Waheed Ibrahim

Keyword(s):

Exchange Rate ◽

Crude Oil ◽

Terms Of Trade ◽

Oil Price ◽

Real Effective Exchange Rate ◽

Crude Oil Price ◽

Long Run ◽

Effective Exchange ◽

Short Run ◽

Effective Exchange Rate

Abstract This study investigates the determinants of real effective exchange rate in Nigeria for the period between 1960 and 2015 using the vector error correction mechanism to separate long run from the short run fundamentals. The findings from the regression estimates revealed that; terms of trade, openness of the economy, net capital inflow and total government expenditure were the major long run determinants of real effective exchange rate in the country while variables such as; broad money supply (M2), nominal effective exchange rate, structural adjustment program dummy, June 12 crisis and change to civil rule dummies were revealed as the major short run determinants of exchange rate in Nigeria between 1960 and 2015. The study concludes by recommending that since the major variable of terms of trade (crude oil price) is out of the government control, the effect of shocks due to the fluctuations of crude oil price can be minimized by shifting the economy from a mono-product nation and diversify the economy to increase productive capacity. Also, the change to civil rule dummy used in the study revealed that the system has not been friendly with the country’s real effective exchange rate, thus needing to review the system and bringing out all negative activities there in to ensure Nigeria’s currency appreciation. Guided openness is also suggested to avert the danger that unguided trade liberalization may bring into the country.

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Dynamics of Algeria’s international reserves

African Journal of Economic and Management Studies ◽

10.1108/ajems-11-2016-0179 ◽

2017 ◽

Vol 8 (4) ◽

pp. 410-419

Author(s):

Mohammad Kashif ◽

S. Thiyagarajan ◽

P. Sridharan

Keyword(s):

Economic Growth ◽

Exchange Rate ◽

Positive Impact ◽

Small Sample ◽

Real Effective Exchange Rate ◽

International Reserves ◽

Content Type ◽

Long Run ◽

Effective Exchange ◽

Effective Exchange Rate

Purpose The purpose of this paper is to explore the determinants of international reserves in Algeria using economic growth and real effective exchange rate variables. The paper used quarterly data from 1985Q1 to 2014Q4. Design/methodology/approach The study employs autoregressive distributed lag (ARDL) approach known as the bounds testing method. The ARDL technique works well for small sample studies also. The current study assesses the influence of economic growth and real effective exchange rates on international reserves in Algeria by evaluating both short-run and long-run dynamics. Findings The study establishes a long-run relationship between international reserves, economic growth and real effective exchange rate. It also reveals that economic growth has a positive impact on international reserves while real effective exchange rate shows a negative effect. Originality/value This paper tries to provide a complete picture of the determinants of international reserves in Algeria. Foreign trade policy makers of Algeria can use the model estimated here to draw pertinent policies regarding international reserves.

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The determinants of ASEAN-5 real effective exchange rate vis-á-vis the UK pound

World Journal of Entrepreneurship Management and Sustainable Development ◽

10.1108/wjemsd-07-2013-0038 ◽

2014 ◽

Vol 10 (2) ◽

pp. 98-118 ◽

Cited By ~ 2

Author(s):

Abdalrahman AbuDalu ◽

Elsadig Musa Ahmed

Keyword(s):

Exchange Rate ◽

Interest Rate ◽

Money Supply ◽

Real Effective Exchange Rate ◽

Content Type ◽

Long Run ◽

Effective Exchange ◽

Short Run ◽

The Uk ◽

Effective Exchange Rate

Purpose – The purpose of this paper is to present an empirical analysis of long-run and short-run forcing variables of purchasing power parity (PPP) for ASEAN-5 currencies vis-à-vis the UK pound, i.e. their real effective exchange rate (REER). Design/methodology/approach – This study uses a recently developed autoregressive distributed lag (ARDL) approach to co-integration (Pesaran et al., 2001) over the period 1991:Q1-2006:Q2. Our empirical results suggest that the foreign interest rate (R*) and domestic money supply (M1) are the significant long-run forcing variables of PPP for ASEAN-5 REERs for the three periods. Findings – In the short-run, the variables have different impacts during the sub-periods and full period for ASEAN-5 countries. The results suggest that the domestic money supply (M1) for Malaysia, domestic interest rate and foreign interest rate (R*) for Indonesia, domestic money supply (M1) and term of trades (TOT) for Philippines, foreign interest rate (R*) for Thailand, and foreign interest rate (R*) and net foreign assets (NFA) for Singapore, respectively, have the highest significant short-run forcing variable of PPP for countries REERs. Originality/value – In this respect, the outcomes can derive policy implication for the monetary authorities in these ASEAN-5 countries.

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Currency Depreciation, Trade Balance and Intra-Industry Trade Interactions in Turkey’s OECD Trade

International Journal of Economics and Finance ◽

10.5539/ijef.v8n4p8 ◽

2016 ◽

Vol 8 (4) ◽

pp. 8 ◽

Cited By ~ 1

Author(s):

Mehmet Demiral

Keyword(s):

Exchange Rate ◽

Trade Balance ◽

Real Effective Exchange Rate ◽

Series Data ◽

Adjustment Process ◽

Industry Trade ◽

Long Run ◽

Effective Exchange ◽

Short Run ◽

Effective Exchange Rate

<p>This study re-examines the determinants of Turkey’s trade balance in its manufactures trade with 33 OECD-member countries for the short-run and the long-run. Unlike other studies, in the relationships we also control the moderating effects of the availability of import substitutes proxied by intra-industry trade. We analyze quarterly aggregated time-series data of the period spanning from 1998.QI to 2015.QIII, following the autoregressive distributed lag (ARDL) bounds testing approach to the cointegration and the error correction modeling. Estimation results reveal that real effective exchange rate, together with domestic and foreign incomes are still among the core determinants of Turkey’s trade balance in the manufacturing sectors. There is no significant impact of domestic final oil prices that also include all the taxes on gasoline. The trade balance depends on domestic income negatively and the aggregated income of the OECD countries positively. The finding that real depreciation of Turkish lira against to those of Turkey’s OECD trade partners improves trade balance in both the short-run and the long-run, indicates no evidence of J-curve adjustment process. Unsurprisingly, the intra-industry trade seems to be an important factor that moderates the elasticities of trade balance to its determinants, especially to real effective exchange rate and domestic income. Overall results underline the importance of import-substitution capability besides the export-oriented production to ease the longstanding large trade deficits for Turkey.</p><strong></strong>

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Different Approaches to Merchandise Trade Balance in Pakistan

Global Business Management Review (GBMR) - Vol 12 No 2 (2020): Global Business Management Review ◽

10.32890/gbmr2020.12.2.2 ◽

2020 ◽

Vol 12 (Number 2) ◽

pp. 19-30

Author(s):

Yousuf Aboya ◽

Arsalan Hussain ◽

Rohail Hassan ◽

Hassan Mujtaba Nawaz Saleem ◽

Aamir Hussain Siddiqui

Keyword(s):

Exchange Rate ◽

Trade Balance ◽

Trade Deficit ◽

Real Effective Exchange Rate ◽

Series Data ◽

Long Run ◽

Effective Exchange ◽

Short Run ◽

Merchandise Trade ◽

Effective Exchange Rate

The current study empirically examines the three major approaches to trade balance for Pakistan by utilizing the yearly data from 1972 to 2016. Monetary, elasticity, and absorption approaches were tested by developing a model that incorporates all three approaches. The significant contribution of the study is that it uses only the merchandise trade deficit account, which includes trade of only physical goods. The study used time-series data; therefore, variables have been tested for the stationarity, and it is found that there is a combination of I (0) and I (1) variables, so ARDL bounds testing approach to co-integration has been employed to find the short run and long run associations among the variables. The bound test results discovered that there is a presence of stable long-term association among the merchandise trade deficit account, real broad money supply, real effective exchange rate, and real domestic absorption. The results further revealed that merchandise trade discrepancy is determined purely by the real effective exchange rate, which specifies that the exchange rate's devaluation increases the deficit in the long run whereas in the short-run increase in domestic absorption decreases the merchandise trade deficit.

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The Dynamic Relationship between Tourism and Economy: Evidence from Nepal

Journal of Business and Management ◽

10.3126/jbm.v5i0.27384 ◽

2018 ◽

Vol 5 ◽

pp. 16-22 ◽

Cited By ~ 1

Author(s):

Dipendra Karki

Keyword(s):

Economic Growth ◽

Real Effective Exchange Rate ◽

Dynamic Relationship ◽

Long Run ◽

International Tourist ◽

Augmented Dickey Fuller ◽

Effective Exchange ◽

Short Run ◽

Effective Exchange Rate ◽

Adf Test

The objective of this paper is to analyse the role of tourism in the Nepalese economic growth. I use a trivariate model of real Gross Domestic Product (GDP), international tourist arrivals and real effective exchange rate to investigate the long-run and short-run relationship between tourism and economic growth. The Augmented Dickey-Fuller ( ADF) test is used to determine the order of integration of the series, and I employ the Engle- Granger cointegration procedure to test for the presence of long-run relationship. By using annual macroeconomic data for Nepal for the period of 1962-2011, results reveal that there is a cointegrating relationship between tourism and economic growth.

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Asymmetric Effects of Exchange Rate and Its Relationship with Foreign Investments: A Case of Indian Stock Market

Vision The Journal of Business Perspective ◽

10.1177/0972262920914107 ◽

2020 ◽

pp. 097226292091410

Author(s):

Saif Siddiqui ◽

Preeti Roy

Keyword(s):

Exchange Rate ◽

Stock Returns ◽

Real Effective Exchange Rate ◽

Rate Asymmetry ◽

Long Run ◽

High Volatility ◽

Effective Exchange ◽

Short Run ◽

Indian Stock Market ◽

Effective Exchange Rate

Emerging markets, including India, are witnessing an influx of foreign capital. The article investigates the role of exchange rate which influences both the net foreign institutional investments (FIIs) and the stock markets, using monthly data, from January 2008 to May 2018. The effects of real effective exchange rate are studied through non-linear ARDL co-integration. The long-run relationship is found in all the three models constructed. The results highlight the nature of FII flows in relation to exchange rate asymmetry. Real rupee depreciation has a long-run effect on their debt flows. The ‘adjustment asymmetry effect’ of exchange rate is found for equity flows in the long run. The similar effect is observed for the Nifty 50 model. Due to high volatility, even positive stock returns do not attract equity FII flows. In the short run, rupee depreciation in real terms negatively influences Nifty returns. The S&P 500 returns explain FII flows indicating information asymmetry. These outcomes serve a vital input for key stakeholders such as potential FIIs, domestic traders, regulators and policymakers.

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Analyzing the Impact of Real Effective Exchange Rate and Investment on Trade Deficit in the United Kingdom

Pakistan Journal of Humanities and Social Sciences ◽

10.52131/pjhss.2021.0901.0127 ◽

2021 ◽

Vol 9 (2) ◽

pp. 241-249

Author(s):

Allah Ditta ◽

Ruqayya Ibraheem ◽

Muahammad Ayub

Keyword(s):

United Kingdom ◽

Exchange Rate ◽

Trade Deficit ◽

Real Effective Exchange Rate ◽

The United Kingdom ◽

Long Run ◽

Effective Exchange ◽

Short Run ◽

Effective Exchange Rate ◽

The Impact

The major purpose of this study is to determine the long-run and short-run determinants of the trade deficit in the United Kingdom (UK). The autoregressive distributive lagged (ARDL) approach has been employed for estimation purposes in this study. The study finds that there is negative and significant relationship exists between the real effective exchange rate (REER) and the export to import ratio in the long run. The empirical results reveal that a one percent increase in REER causes a decrease in the export to import ratio by 0.37%, while a positive relationship is observed between REER and the export to import ratio in the short run. The impact of gross fixed capital formation on the export to import ratio is statistically significant and negative in the long run as well as in the short run. The value is negative and statistically significant which validates convergence towards the equilibrium both in the case of UK exports to high-income and low-income trading partners (LITPs). The study suggests that real exchange rate and investment are major determinants for trade balance in the case of the United Kingdom and need proper attention.

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Effects of Exchange Rate Volatility On Non-Traditional Exports In Ghana

Journal of Business and Enterprise Development ◽

10.47963/jobed.2017.05 ◽

2017 ◽

Vol 7 (2017) ◽

pp. 80-103

Author(s):

Camara Kwasi Obeng

Keyword(s):

Exchange Rate ◽

Exchange Rate Volatility ◽

Real Effective Exchange Rate ◽

Distributed Lag ◽

Long Run ◽

Effective Exchange ◽

Short Run ◽

Auto Regressive ◽

The Government ◽

Effective Exchange Rate

The government of Ghana has implemented a number of policies to strengthen the production and export of non-traditional products as a way of diversifying exports in Ghana with very little success. Foremost among these policies is the liberalization of exchange rate. Meanwhile, the exchange rate has been very volatile. The study, therefore, examines the effects of exchange rate volatility on non-traditional exports in Ghana.This study employed Auto-regressive Distributed Lag (ARDL) co-integration estimation technique for the investigation. The results indicate that exchange rate volatility negatively impacts Ghana’s non-traditional exports. Also, the effect is greater in the long- run than it is in the short-run. Other results also show that world income, growth rate of the economy and Treasury bill rate promote non-traditional exports, but real effective exchange rate does not. The value of the paper lies in the discussion of the short-run and long-run effects of exchange rate volatility on non-traditional exports in the Ghanaian context.

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