Theoretical and Applied Economics
No. 1 / 2020 (622), Spring
Trade relation between India and other BRICS countries: A multidimensional approach using Gravity Model and Granger Causality
Nmims University, Bangalore Campus, India
Abstract. 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.
Keywords: BRICS, Gravity model, Granger Causality Model, foreign trade, economic integration.
Contents
- An approach to the use of cryptocurrencies in Romania
using data mining technique
Nora CHIRIȚĂ
Ionuț NICA
- Intellectual property rights, human capital
and types of entrepreneurship in emerging
and developing countries
Kamilia LOUKIL
- Trade relation between India and other BRICS countries:
A multidimensional approach using Gravity Model
and Granger Causality
Dr. N. KUBENDRAN
- Do the macroeconomic indicators influence foreign
direct investment inflow? Evidence from India
Akhil SHARMA
Abdul RISHAD
- Conceptual dimensions regarding the financial contagion
and the correlation with the stock market in Romania
Ionuț NICA
Nora CHIRIȚĂ
- An analysis of poverty among the informal workers of India
Rajyasri ROY
Amit KUNDU
- Testing Wagner’s Law for sub-Saharan Africa:
A panel cointegration and causality approach
Mustapha JOBARTEH
- A review of international Fisher’s effect focusing on inflation
in Indian context for corporate decisions
Sharath AMBROSE
Dr. K.R. MANJUNATH
- Factors that influence wages differences in formal sector
on male and female workers in Palembang City
Intan NURPRATIWI
Syamsurijal AK
YUNISVITA
- Optimal Taylor rule in the new era
central banking perspective
Ayşegül Ladin SÜMER
- The analysis of the quarterly evolution
of the gross domestic product in 2019
Constantin ANGHELACHE
Ștefan Virgil IACOB
Dana Luiza GRIGORESCU
- The analysis of the international trade of Romania
Mădălina-Gabriela ANGHEL
Ștefan Virgil IACOB
Dragoș Alexandru HAȘEGAN
- The Romanian population’s perceptions regarding
income inequalities and discrimination
Amalia CRISTESCU
Ana-Maria GATEA
Eva MILITARU