This paper reassesses the dynamic links between trade and growth in India during the post-independence period. The main result is a short-run bi-directional relationship between exports and output growth. This finding is supported both by standard Granger causality tests, and by an alternative estimator which is robust to the integration and cointegration properties of the VAR process. Moreover, I document a long-run unidirectional causal effect from exports to import growth. I discuss the policy implications of this evidence and conclude that a neutral policy regime, not discriminating between export and strategic domestic sectors, represents a suitable development strategy for India.
"Reassessing the dynamic links between trade and growth: new empirical evidence from India"
TRONZANO, MARCO ROBERTO
2010-01-01
Abstract
This paper reassesses the dynamic links between trade and growth in India during the post-independence period. The main result is a short-run bi-directional relationship between exports and output growth. This finding is supported both by standard Granger causality tests, and by an alternative estimator which is robust to the integration and cointegration properties of the VAR process. Moreover, I document a long-run unidirectional causal effect from exports to import growth. I discuss the policy implications of this evidence and conclude that a neutral policy regime, not discriminating between export and strategic domestic sectors, represents a suitable development strategy for India.
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