IJIMT 2017 Vol.8(3): 180-183 ISSN: 2010-0248
doi: 10.18178/ijimt.2017.8.3.724

Do Exchange Rate Movements Affect India’s Services Exports? Evidence from ARDL Bounds Testing Approach

Manoranjan Sahoo, M. Suresh Babu, and Umakant Dash
Abstract— This study examines the impact of exchange rate movements on the services exports in India during 1975 to 2014. We use the Autoregressive and Distributed Lag (ARDL) bounds testing cointegration approach to examine the long run equilibrium relationship among the variables. The cointegration result shows that there exist long run equilibrium relationship among the variables. Further, our results show that in the long run exchange rate has a negative and significant impact on the total services exports (TSE) whereas the impact is negative but not significant in the short run. The study also reveals that the supply augmenting factors (such as FDI inflows, financial development and globalisation) and the demand side factors (such as world demand for services exports) are more dominant than the price effects to affect the services exports in India. Therefore, to maintain price competition, exchange rate policies need to be complemented by suitable supply side policies such as encouraging FDI inflows in the service sectors to sustain the rising services exports in the long run.

Index Terms— Exchange rate, globalisation, India, service exports.

Manoranjan Sahoo is with the Department of Humanities and Social Sciences, Indian Institute of Technology Madras, India (e-mail: msahoo100@gmail.com).

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Cite: Manoranjan Sahoo, M. Suresh Babu, and Umakant Dash, " Do Exchange Rate Movements Affect India’s Services Exports? Evidence from ARDL Bounds Testing Approach," International Journal of Innovation, Management and Technology vol. 8, no. 3, pp. 180-183, 2017.

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