Determinants and Competitiveness of Indo-Canadian Bilateral Trade

33 Pages Posted: 16 May 2013 Last revised: 3 Nov 2016

See all articles by Durairaj Kumarasamy

Durairaj Kumarasamy

Consultant, ASEAN India Centre, Research and Information System for Developing Countries

Nirmala Velan

Pondicherry Central University

Date Written: 2013

Abstract

Using augmented import and export demand functions, the paper examined the determinants and competitiveness of Indo-Canadian bilateral trade during 1996 second quarter to 2010 first quarter. They were estimated by including Canadian FDI inflows and exchange rate volatility, along with the traditional variables (viz., relative prices and real income) as explanatory variables. Further, ARDL model was used to estimate long and short-run relationships among the variables. The results revealed that the traditional variables responded well to import demand, rather than to export demand. While Canadian FDI inflow had marginal effect on India’s short run export demand, no such long run influence could be traced. Exchange rate volatility exercised positive effect on export demand in both the long and short-run, but revealed marginal negative effect on import demand in both the periods. Thus, the study indicated high scope for bilateral trade and FDI flows between India and Canada.

Keywords: bilateral trade, import demand function, export demand function, exchange rate volatility, foreign direct investment

JEL Classification: F14, F21

Suggested Citation

Kumarasamy, Durairaj and Velan, Nirmala, Determinants and Competitiveness of Indo-Canadian Bilateral Trade (2013). Available at SSRN: https://ssrn.com/abstract=2265283 or http://dx.doi.org/10.2139/ssrn.2265283

Durairaj Kumarasamy (Contact Author)

Consultant, ASEAN India Centre, Research and Information System for Developing Countries ( email )

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New Delhi, 110 003
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8287254499 (Fax)

HOME PAGE: http://www.ris.org.in

Nirmala Velan

Pondicherry Central University ( email )

Pondicherry 605 014
India

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