Interlinkage Between Real Exchange Rate And Current Account Behaviors: Evidence From India

Arouri, Mohamed El Hédi; Dar, Arif Billah; Bhanja, Niyati; Tiwari, Aviral Kumar; Teulon, Frédèric

doi:10.19030/jabr.v31i4.9295

Cited by 2 publications

(2 citation statements)

References 19 publications

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“…On the other hand, empirical studies such as Arouri et al (2014) and Lee and Chinn (2006) revealed a negative relationship between currency devaluation and the current account balance. Arouri et al (2014) examined the dynamic interaction between real effective exchange rate and real current account deficit in India using VAR and impulse response, and suggested that real currency depreciation worsens the current account balance. In contrary to the conventional wisdom, a positive shock to the real exchange rate, i.e.…”

Section: Literature Reviewsmentioning

confidence: 99%

Does real exchange rate devaluation improve the current account balance of highly indebted low income countries?

Ayele

2019

AJEMS

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Purpose The purpose of this paper is to examine whether real exchange rate devaluation improves the current account balance of four highly indebted low-income countries of East Africa. Design/methodology/approach The pooled mean group (PMG) approach is used for panel data from four countries over the period 1970–2016. The paper also applied bound testing and ARDL model for time-series data from individual sample countries. Findings The panel PMG/ARDL estimation result reveals that real exchange rate devaluation has no significant impact on the current account balance, both in the short and long run. However, the time-series analysis using the bound testing and restricted ARDL estimation suggests that real exchange rate devaluation improves the current account balance in the long run for only Ethiopia. The overall empirical results reveal that the current account balance would improve with the rising domestic income while it deteriorates with increasing foreign income and external indebtedness in the long run. Originality/value The paper is original.

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Section: Literature Reviewsmentioning

confidence: 99%

Does real exchange rate devaluation improve the current account balance of highly indebted low income countries?

Ayele

2019

AJEMS

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“…This eventually brings us to the conclusion that these nations' current account deficit was unmaintainable and failed to move towards external-account equilibrium. Arouri et al (2015) focussed on analysing the sensitivities of current account deficit in response to real exchange rate based on annual data series throughout 1975 to 2011. The study revealed that a rise in rupee exchange rate lowers current account imbalance and it further emphasised the disturbances in the form of productivity shocks, technological advancements and changes in consumer behaviour.…”

Section: Literature Reviewmentioning

confidence: 99%

An Evaluation of Current Account Behaviour Amidst Globalisation

Kaur,

Kulaar

2023

OJC

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The study analysed the current account response to international economic factors namely, oil price volatility, exchange rate of Indian rupee, trade openness, net foreign assets and home country inflation using data spanning 2001 Q1 to 2020 Q4. The study revealed that a hike in oil price volatility, net foreign assets and home country inflation leads to current account deficit increase. The main reason being the failure of intertemporal hypothesis for the Indian economy. The study concludes that for maintaining healthy current account position, rupee should be allowed for free conversion and trade barriers should be reduced to the minimum. Also, private saving should be encouraged to provide a buffer for elevated oil import bill and efforts should be made to cut the oil imports as far as possible.

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Interlinkage Between Real Exchange Rate And Current Account Behaviors: Evidence From India

Abstract: The study analyzes the dynamic interlinkage between India's real effective exchange rate and real current account deficit using standard VAR and structural VAR (SVAR)

Cited by 2 publications

References 19 publications

Does real exchange rate devaluation improve the current account balance of highly indebted low income countries?

Does real exchange rate devaluation improve the current account balance of highly indebted low income countries?

An Evaluation of Current Account Behaviour Amidst Globalisation

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