Foreign Trade Review

Sage Publications, Inc.
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  • Exchange Rate Changes and the J-curve Effect: Asymmetric Evidence from a Panel of Five Emerging Market Economies

    Using the symmetric and asymmetric specifications of the pooled mean group estimator, we attempted to scrutinise the possibility of the J-curve effect in the case of Brazil, Russia, India, China and South Africa. In addition to both real effective exchange rate changes and nominal effective exchange rate changes, the possible impact of domestic and foreign demand pressures on the trade balance is also estimated. Incorporating a quarterly data set spanning from 2000Q1 to 2020Q2, the results based on the symmetric and asymmetric model establish no evidence of the J-curve phenomenon. However, when asymmetric possibilities are considered, appreciation is found to deteriorate the trade balance relatively by a greater magnitude whereas the impact of currency depreciation is insignificant. In addition, no asymmetric evidence has been reported concerning the effect of domestic and foreign demand. However, a hike in the former deteriorated the trade balance whereas an increase in the latter improved it in both linear and non-linear frameworks. JEL Codes: F4, F41, F42

  • Prediction of Electricity Trade Partners Based on the Network Theory: The West Asia Community

    This study aims to predict electricity cross-border trade partners based on the network theory and to investigate the position and importance of West Asia community in the global electricity trade network. For this purpose, the global network is constructed to examine the role of each node in the network for the time period of 2010–2018. Different communities are identified to proceed with the network analysis. The innovative analysis is link prediction to forecast missing links from the network. The results suggest more interconnectedness among community members, especially Iran, Turkey and Russia, which are the prominent nodes in the community. The link prediction outcomes offer the most probable missing links from the community and lead us to select the common neighbour approach as the most efficient method. JEL Codes: D85, Q27

  • Trade Data Falsification and Informal Capita Movement: A Study of Bangladesh with Major Asian Trade Partners

    The imposition of restrictive trade policies and consequent fabrication of foreign trade statistics acts as hindrance for effective policy formulations in the developing countries. This article presents the trade misreporting scenario of Bangladesh in relation to major Asian trade partner countries (China, India and Singapore) between 1973 and 2018 and examines the possibilities of informal capital movements across borders. Using the vector autoregression (VAR) and autoregressive distributed lag (ARDL) models, we first build partner-level exercise, followed by a combined panel, and find that spot and forward exchange rates, custom duties and real interest rate differences between foreign and home largely affect trade misreporting rates. Interestingly, we also find that the values of past import under-invoicing might also lead to export under-invoicing and vice versa, a two-way causal relationship. JEL Codes: F14, F68, C10, C52

  • Asymmetric Exchange Rate Pass Through to Consumer Prices: Evidence from Zambia

    The purpose of this study was to examine the asymmetric exchange rate pass through (ERPT) to consumer price inflation in Zambia. We examined ERPT to consumer price inflation arising from kwacha depreciation and appreciation for the period between the first quarter of 1985 to the fourth quarter of 2017. We employed the structural vector autoregressive model. The results showed that ERPT to consumer price inflation is incomplete and asymmetric. Consumer prices in Zambia are more responsive to kwacha depreciation than to appreciation. The depreciation of the kwacha has a greater significant impact on consumer prices than the appreciation of the kwacha. The impulse response function analysis showed that the shock to kwacha depreciation is very persistent than that of kwacha appreciation. Finally, the forecast error variance decomposition showed that a depreciation shock explains a bigger portion of the variance in consumer price inflation than an appreciation shock. These findings show that kwacha depreciation and appreciation have different effects on consumer price inflation, thereby confirming the presence of asymmetries in the ERPT. The study also accounted for the effect of commodity price booms in influencing ERPT. However, results of ERPT did not change much with the inclusion of commodity price booms. JEL Codes: E31, F31

  • General Equilibrium Trade Policy Analysis among One Belt One Road Nations Using Structural Gravity Framework

    Currently, the world is witnessing one of China’s most significant economic integration initiatives–One Belt One Road (OBOR). This article aims to evaluate the general equilibrium (GE) effects of this initiative on member nations. The structural gravity model is used in this study to perform the counterfactual analysis while analysing the conditional and general equilibrium effects of the trade policy of border removal on international trade flow among the member countries. The estimates suggest varied strade gains for the member countries in response to the trade policy changes. Most Asian countries are witnessing an increase in producers’ prices and therefore gaining more from globalisation. We also deduced that the member countries had reached half of their potential to trade gains, with most developing countries witnessing a decrease in multilateral trade resistance (MTR). The findings of this study implicate a debate for the policymakers over continuing support for further trade integration. JEL Codes: C21, F15, F17

  • Book review: Naoto Jinji, Xingyuan Zhang and Shoji Haruna (Eds), Deep Integration, Global Firms, and Technology Spillovers

    Naoto Jinji, Xingyuan Zhang and Shoji Haruna (Eds), Deep Integration, Global Firms, and Technology Spillovers, Springer Nature Singapore Pte Ltd, Singapore, 2022. 196 pp., Open access, ISBN 978-981-16-5209-7.

  • Dynamics of Twin Deficits: An Enquiry of the Mundell–Fleming Proposition for India

    Twin deficits have appeared as the indispensible reality of the Indian economy since long. The study is an attempt to trace out the inherent dynamics of India’s twin deficits problem, particularly to unveil its transmission mechanism. Applying annual secondary data for the period 1971 to 2019, the endeavour reveals India’s twin deficits encounter to follow the path prescribed by the Mundell- Fleming open economy IS-LM model. However, India’s realization is found to differ slightly from the standard theoretical manifestation. In India, domestic exchange rate is found to appreciate followed by the expansionary fiscal policies of the government. The improved exchange rate, owing to the sterilization policies of the monetary authority to uphold the country’s trade competitiveness, is observed to augment India’s domestic interest rate. Again, the increased interest rate, due to its positive effect on the financial inflows, is found to deteriorate India’s external balance. JEL Classification: H6, F32, F31, F21, E43

  • Factors Associated with Growth in India’s International Reserves: VECM Analysis

    This study empirically examines the determinants of India’s international reserves in the long run and in the short run with seven other macroeconomic variables using the vector error correction model. The Johansen co-integration results indicate a positive long-run relationship between international reserves holdings and broad money M3 and foreign direct investment (FDI) inflows and negative relationship with external debt. The Granger causality test outcome also verifies the results, demonstrating that increase in broad money supply and FDI inflows are the reason for the accumulation in international reserves in India in the long run. M3 demonstrated a higher influence on international reserves suggesting that monetary policy is used widely in regulating the international reserves in India. This study also estimated the short-run dynamics and the tendency of the variables to reinstate to its long-run equilibrium. The error correction term coefficient entails a moderately low level of adjustment of international reserves holding, indicating that it is the other reason that the level of international reserves holding in India is high in the short run. JEL Codes: E51, F31, F41

  • Testing for the Bidirectional Relationship Between FDI in Services and Trade in Services: Evidence from Emerging Economies

    We examine the two-way links between foreign direct investments (FDI) in services and trade in services for 26 emerging economies from 2003 to 2015 using sectoral and sectoral disaggregated FDI data. Within a multivariate framework, we use panel unit root tests, recently developed heterogeneous panel cointegration and panel vector error correction model (VECM). Our results confirmed the cointegrating relationship between trade in services, FDI in services, financial services FDI and nonfinancial services FDI. We find the existence of long-run unidirectional causality from trade in services to FDI in services. However, the disaggregated analysis shows a bidirectional link between nonfinancial services FDI and trade in services in the short run. Still, there is no causality between financial services FDI and trade in services both in the short run and long run. The result also shows the evidence of unidirectional causality running from trade in services to nonfinancial services FDI in the long run. It implies that sectoral decomposition matters in the FDI–trade nexus in emerging economies. JEL Codes: G20, F14, G20, F23

  • Measuring Export Related Port Logistics in India: An Attempt to Rank Major Ports

    The main objective of this article is to showcase the major activities/processes each exporter/importer needs to go through in any land port, seaport or airport. The article looks into the processes, time taken during various processes, the perceptions of stakeholders about the extent of challenges they face during these processes and the logistics costs. Finally, the article provides a comparison across exporting ports in terms of their efficiency in clearing cargo. However, we have also attempted to measure of the efficiency of the port in terms of cargo offloading. JEL Codes: P45, R41, R48, Q37

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