How South Asian Economies Managed Their Trade Risks Collaboratively ? A Study
DOI:
https://doi.org/10.17010/aijer/2022/v11i4/172741Keywords:
Shock Persistence
, Time-Varying Exogenous Factor, Time-Varying Inflation Volatility, Time-Varying Population VolatilityJELClassification Codes
, C40, G10, G11Paper Submission Date
, April 25, 2022, Paper sent back for Revision, August 12, Paper Acceptance Date, November 1, 2022Abstract
South Asian economies, including India, witnessed a considerable GDP decline in the past few years. According to reliable published resources for the fiscal year Q4-2020, India’s GDP growth was as low as 3.1% on average over the previous 11 years. This empirical work was built upon the fundamental volatility model (using a 2-asset portfolio case). It comprised the exponential decay function on annual figures from 1976–2019 of overall trade, exports, and imports from five South Asian countries, namely Bangladesh, India, Nepal, Pakistan, and Sri Lanka (Bhutan was excluded due to paucity of data). For empirical justification of spillover effects and shock persistence, two exogenous macroeconomic factors, namely, the inflation percentage (CPI) and population rates, were also taken into account. The broad outcomes were mainly two. Firstly, there was a greater positive impact on time-varying trade-volatility shock persistence levels due to time-varying exogenous factors like inflation and population volatility. The second outcome is that portfolio or joint probabilities “reduce†such an impact, that is, time-varying portfolio volatility of the inflation rate and population rate did not reduce the shock persistence of time-varying trade volatility across the nations studied.Downloads
Downloads
Published
How to Cite
Issue
Section
References
Aizenman, J., Jinjarak, Y., Estrada, G., & Tian, S. (2017). Flexibility of adjustment to shocks: Economic growth and volatility of middle-income countries before and after the global financial crisis of 2008 (Working Paper No. 23467). National Bureau of Economic Research. https://doi.org/10.3386/w23467
Bagella, M., Becchetti, L., & Hasan, I. (2004). The anticipated and concurring effects of the EMU: Exchange rate volatility, institutions and growth. Journal of International Money and Finance, 23(7–8), 1053–1080. https://doi.org/10.1016/j.jimonfin.2004.08.007
Becchetti, L., & Hasan, I. (2008). The effects of regional integration: Impact on real effective exchange rate volatility, institutional quality and growth for MENA countries. In, B. Guha-Khasnobis, & G. Mavrotas (eds.), Financial development, institutions, growth and poverty reduction. Studies in development economics and policy. Palgrave Macmillan. https://doi.org/10.1057/9780230594029_12
Boserup, E., & Ruttan, V. W. (1981). Population and technological change: A study of long-term trends. Population and Development Review, 8(1), 181. https://doi.org/10.2307/1972698
Brainard, W. C., & Cooper, R. N. (1968). Uncertainty and diversification in international trade. Food Research Institute Studies, 8(3), 257–285. https://doi.org/10.22004/ag.econ.134983
Chow, Y. P., Muhammad, J., Bany-Ariffin, A. N., & Cheng, F. F. (2018). Macroeconomic uncertainty, corporate governance and corporate capital structure. International Journal of Managerial Finance, 14(3), 301–321. https://doi.org/10.1108/ijmf-08-2017-0156
Kepaptsoglou, K., Karlaftis, M. G., & Tsamboulas, D. (2010). The gravity model specification for modeling international trade flows and free trade agreement effects: A 10-year review of empirical studies. The Open Economics Journal, 3, 1–13. https://doi.org/10.2174/1874919401003010001
Kose, M. A., & Riezman, R. (2001). Trade shocks and macroeconomic fluctuations in Africa. Journal of Development Economics, 65(1), 55–80. https://doi.org/10.1016/s0304-3878(01)00127-4
Kothadia, K. D., & Nayak, D. N. (2020). Modeling inflation in India: A univariate approach. Arthashastra Indian Journal of Economics & Research, 9(2–3), 25–38. https://doi.org/10.17010/aijer/2020/v9i2-3/155602
Malhotra, R. (2022). Empirical illustration of cyclical behaviours of fertility and inflation rates in context to Asian economies. SSRN Electronic Journal. https://ssrn.com/abstract=4193621
Myint, H. (1958). The “classical theory†of international trade and the underdeveloped countries. The Economic Journal, 68(270), 317–337. https://doi.org/10.2307/2227598
Nayak, D., & Barodawala, R. (2021). The impact of macroeconomic factors on the Indian stock market: An assessment. Arthashastra Indian Journal of Economics & Research, 10(2–3), 27–40. https://doi.org/10.17010/aijer/2021/v10i2-3/167172
Nguyen, T. N., Pham, T. H., & Vallée, T. (2020). Trade volatility in the association of Southeast Asian nations plus three: Impacts and determinants. Asian Development Review, 37(2), 167–200. https://doi.org/10.1162/adev_a_00153
Osei-Assibey, K., & Dikgang, O. (2020) International trade and economic growth: The nexus, the evidence, and the policy implications for South Africa. The International Trade Journal, 34(6), 572–598. https://doi.org/10.1080/08853908.2020.1737598
Reboredo, J. C. (2012). Modeling oil price and exchange rate co-movements. Journal of Policy Modeling, 34(3), 419–440. https://doi.org/10.1016/j.jpolmod.2011.10.005
Sayan, S. (2005). Heckscher – Ohlin revisited: Implications of differential population dynamics for trade within an overlapping generations framework. Journal of Economic Dynamics and Control, 29(9), 1471–1493. https://doi.org/10.1016/j.jedc.2004.08.008
Shachmurove, Y., & Spiegel, U. (2004). Size matters in international trade and population size. Available at SSRN. http://dx.doi.org/10.2139u
Stockman, A. C. (1985). Effects of inflation on the pattern of international trade. The Canadian Journal of Economics, 18(3), 587–601. https://doi.org/10.2307/135021
Sunil, N., Purswani, G., & Benny, N. R. (2019). Interrelationship and interdependence among macroeconomic variables in India. Arthashastra Indian Journal of Economics & Research, 8(1), 50–60. https://doi.org/10.17010/aijer/2019/v8i1/142714
