Optimising and Non-optimising Balance of Trade Models: A Comparative Evidence From India

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Title Optimising and Non-optimising Balance of Trade Models: A Comparative Evidence From India
Author Singh, Tarlok
Journal Name International Review of Applied Economics
Year Published 2004
Place of publication United Kingdom
Publisher Routledge
Abstract This study estimates and compares the competing optimising and non-optimising balance of trade models using Indian data. The results obtained from the optimising model suggest that the prices relative to user cost of capital and the real wealth lead to a deterioration, while the real capital stock results in an improvement in trade balance. The estimates of conventional non-optimising balance of trade model show the significant effect of domestic income and real exchange rate and the insignificant effect of world income on the balance of trade. The error correction models reinforce the long run estimates and show the significant effect of lagged equilibria on the balance of trade. The non-nested hypothesis tests provide mixed evidence for the preference of one model over the other. The J test suggests that the optimising model outperforms the non-optimising model, while the F test shows that both these models are acceptable in explaining the balance of trade.
Peer Reviewed Yes
Published Yes
Volume 18
Issue Number 3
Edition 2004
Page from 349
Page to 368
ISSN 0269-2171
Date Accessioned 2006-07-21
Date Available 2008-02-14T08:21:23Z
Language en_AU
Research Centre Griffith Asia Institute
Faculty Griffith Business School
Subject International Economics and International Finance
URI http://hdl.handle.net/10072/16819
Publication Type Journal Articles (Refereed Article)
Publication Type Code c1x

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