Exchange Rate Volatility and Export Growth: Post-Reform Experience of India

Authors

  •   Niyati Bhanja Research Scholar, Department of Economics, School of Management, Pondicherry University, Kalapet, Puducherry-605 014
  •   Amaresh Samantaraya Reader, Department of Economics, Pondicherry University, Kalapet, Puducherry-605 014
  •   Arif Billah Dar Research Scholar, Department of Economics, Pondicherry University, Kalapet, Puducherry-605 014

Keywords:

Export Growth

, NEER, REER, Garch, Wavelet, Volatility, Exchange Rate

F31

, F41

Paper Submission Date

, January 11, 2013, Paper sent back for Revision, April 8, Paper Acceptance Date, April 23, 2013.

Abstract

This paper seeks to investigate empirically the impact of exchange rate volatility on India's export growth over the period between from April 1993 to September 2010. The measure of volatility is estimated for both the nominal and the real effective exchange rate (NEER and REER) using Bollerslev's GARCH model and the wavelet decomposition technique. The ordinary least square (OLS) procedure is then employed to verify the link between export growth and the volatility of exchange rate. The results of ordinary least squares (OLS) suggests that both real and nominal exchange rate volatility exerts a significant positive impact on export growth, irrespective of different measures of volatility employed. Moreover, corroborating conventional wisdom, the foreign economic activities and the domestic import are also found to have a significant positive effect on the growth of exports.

Downloads

Download data is not yet available.

Downloads

Published

2013-09-01

How to Cite

Bhanja, N., Samantaraya, A., & Dar, A. B. (2013). Exchange Rate Volatility and Export Growth: Post-Reform Experience of India. Indian Journal of Finance, 7(9), 27–35. Retrieved from https://indianjournalofcomputerscience.com/index.php/IJF/article/view/72090

Issue

Volume 7, Issue 9, September 2013

Section

Articles

References

Ahmed, M. S., (2009). An empirical study on exchange rate volatility and it impacts on bilateral export growth: Evidence from Bangladesh. MPRA, Paper No. 19567. Retrieved from http://mpra.ub.uni-muenchen.de/id/eprint/19567

Alam, S., & Ahmed, Q. M., (2012). Exchange rate volatility and aggregate exports demand through ARDL framework: An experience from Pakistan economy. Review of Applied Economics, 8 (1), 79-94.

Alam, S. (2010). A Reassessment of the effect of exchange rate volatility on Pakistan's exports demand: ARDL approach. European Journal of Economics Finance and Administrative Sciences, 21 (2), 77-91.

Aliyu, S.U. R. (2010). Exchange rate volatility and export trade in Nigeria: An empirical investigation. Applied Financial Economics, 20 (13), 1071 - 1084. DOI:10.1080/09603101003724380

Bacchetta, P., & Wincoop, E.V., (2000). Does exchange rate stability increases trade and welfare? American Economic Review, 90 (5), 1093-1109. DOI: 10.1257/aer.90.5.1093

Baum, C.F., & Caglayan, M., (2006). Effects of exchange rate volatility on the volume and volatility of bilateral exports. Retrieved from http://repec.org/mmf2006/up.1991.1145197920.pdf

Bollerslev, T. (1986). Generalized autoregressive conditional heteroskedasticity. Journal of Econometrics, 31 (3), 307-327.

Broll, U., & Eckwert, B. (1999). Exchange rate volatility and international trade. Southern Economic Journal, 66 (1), 178-185.

Caballero, R. J., & Corbo, V., (1989). The effect of real exchange rate uncertainty on exports: Empirical evidence. The World Bank Economic Review, 3 (2), 263 - 278.

Chit, M. M. (2008). Exchange rate volatility and exports: Evidence from the ASEAN-China free trade area. Journal of Chinese Economics and Business Studies, 6 (3), 261 - 277. DOI:10.1080/14765280802283543

Chit, M. M., Rizov, M., & Willenbockel, D., (2008). Exchange rate volatility and exports: New empirical evidence from the emerging East Asian economies. Middlesex University Economics and Statistics Discussion Paper No. 127, Middlesex University.

DeGrauwe, P., (1988). Exchange rate variability and the slowdown in growth of international trade. Staff Papers - International Monetary Fund, 35 (1), 63-84.

Grier, K., & Smallwood, A. D. (2007). Uncertainty and export performance: Evidence from 18 Countries. Journal of Money, Credit and Banking, 39 (4), 965-979.

Gupta, G., (2008). Rupee v/s Dollar- “The Double Edged Swordâ€. Indian Journal of Finance, 2 (4), 20 - 25, 32.

Hopper, P., & Kohlhagen, S.W., (1978). The effect of exchange rate uncertainty on the prices and volume of international trade. Journal of International Economics, 8 (4), 483-511.

International Monetary Fund (IMF, 2012). CD ROM-May 2012, International Financial Statistics.

Oskooee, M.B., & Mitra, R. (2007). Exchange rate risk and commodity trade between the U.S. and India. Open Economic Review, 19 (1), 71-80. DOI : 10.1007/s11079-007-9009-9

Prasanna, N. (2011). Foreign direct investment and manufactured exports performance in India. Indian Journal of Finance, 5 (1), 42-48.

Ramachandran, A., Kavitha, N., & Maran, M. N. (2008). Collapse of dollar value-its impact in India. Indian Journal of Finance, 2 (2), 25 - 30.

RBI (2003). Report on Currency and Finance (2002-03). Mumbai: Reserve Bank of India.

RBI (2009). Report on Currency and Finance (2008-09). Mumbai: Reserve Bank of India.

RBI (2012). Handbook of Statistics on Indian Economy 2011-12. Mumbai: Reserve Bank of India.