Reassessment of sustainability of current account deficit in India

Part of : SEEJE ; Vol.10, No.1, 2012, pages 67-79

In this study, we examined the long-run relationship between oil and non-oil exports and imports, in order to see whether the current account deficit in India is sustainable. To achieve our objective we have carried out cointegration analysis with structural breaks (as unit root analysis of both variables shows that these variables have been subject to structural changes). Interestingly, we found that there is a strong evidence of a long-run relationship between non-oil exports and imports and no evidence in the case of oil exports and imports. This implies that a foreign trade deficit is sustainable in the Indian context for non-oil commodities but not for oil commodities
Subject (LC):
oil and non-oil exports, oil and non-oil imports, unit root, structural breaks, cointegration
Περιέχει πίνακες, διαγράμματα, σημειώσεις και βιβλιογραφία, The author wishes to thank two anonymous referees of the journal for their constructive suggestions. Of course, any error that remains is the author’s responsibility. The usual disclaimer applies., JEL Classification: C12, C13, C22, E31, G11
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