The Validity of J-Curve: India Versus BRICS Countries: A Panel Cointegration Approach

Ganapati Mendali ()
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Ganapati Mendali: Anchalik Kishan College

Chapter Chapter 4 in Trade, Investment and Economic Growth, 2021, pp 57-71 from Springer

Abstract: Abstract Countries resort to devaluation (i.e., reducing the value of a home currency concerning foreign currency) to improve the balance of trade. However, deterioration of trade balance is found only in the short run when a nation goes for devaluing its currency. Conversely, the devaluing nation experiences an improvement in the balance of trade in the long run. This deterioration of trade balance first and improvement latter resembles the letter J and branded as the J-curve hypothesis. The objective of this paper is to study the strength of the J-curve of India with BRICS countries from 2011m1 to 2017m6. By utilizing some panel cointegration methods, it shows that the effect of devaluing Indian currency, i.e., Indian Rupee, differs across countries under study. There is no evidence of J-curve found in India.

Keywords: Exchange rate; J-curve; Panel cointegration; FMOLS; BRICS (search for similar items in EconPapers)
JEL-codes: C23 C33 F14 F31 F32 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-981-33-6973-3_4

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DOI: 10.1007/978-981-33-6973-3_4

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