Does economic development cause intra-industry trade? The case of India: 1971 to 2000

Sarmila Banerjee and Ranajoy Bhattacharyya

MPRA Paper from University Library of Munich, Germany

Abstract: India’s intra-industry trade (IIT) is evaluated and analyzed from 1971 to 2000. IIT is found to have an upward trend with a growth rate that is close to the growth rate of GNP. A host of macro economic indicators are cointegrated with IIT suggesting that there is a stable relationship between IIT and the level of economic development of India. The causation of this relationship is not however unidirectional as the existing theoretical literature on IIT suggests. There is bi-directional causality for these variables. This implies that though economic development boosts IIT, it can equally be interpreted as a proxy for economic development and a predictor of future industrial progress rather than one that strictly follows it.

Keywords: Intra Industry Trade; Economic Development; Causality (search for similar items in EconPapers)
JEL-codes: F12 O11 (search for similar items in EconPapers)
Date: 2004, Revised 2004
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Citations: View citations in EconPapers (4)

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