Exploring the Determinants of India’s Intra-Industry Trade: A Panel VAR/VECM Approach
Journal Title: International Journal of Computational Engineering and Management IJCEM - Year 2015, Vol 18, Issue 3
Abstract
Intra-Industry Trade (IIT) is a simultaneous import and export of similar goods and services by a country. This type of trade pattern has become an integral part of not only India’s trade but also for World. Since comparative advantage is not mandatory and adjustment costs are also lower, therefore, this type of trade is supposed to be better than the conventional trade pattern. A country has to identify its key determinants which may promote the IIT, to be a successful player in the long run. The present study is an attempt to identify the key determinants of India’s IIT with different country groups. The paper employed panel VAR/VECM model to find out the cause and effect relationships between the determinants and IIT. The data ranges from the year 1991 to 2013 and the findings reveal that indicators of economic distance like per-capita GDP difference and capital-labor ratio are not found to significant for causing IIT, however, the indicator for absolute values of economic size like per-capita GDP and capital-labor ratio are found to be the factors which are causing IIT. Therefore, India needs to pay more attention on its trade policies to get maximum benefits from IIT.
Authors and Affiliations
Amit Srivastava
Keywords
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