Foreign Trade Review

We empirically investigate the recent history of currency crises (stress periods) and the factors influencing their likelihood in India. This study aims at constructing an early warning system (EWS) to forecast the possibility of an imminent crisis in the crisis window of 12 months by employing signal extraction methodology and logistic regression model for the period 1986–2015. Among the 22 identified crisis months (stress periods), only early episodes (1990–1991) were followed by a devaluation and not the later periods (post 1991). Both signal extraction methodology and logistic regression model indicate no relative importance to the three generations of currency crises models. Nevertheless, the results advocate that logistic regression model fares better than signal extraction technique. The results also suggest that building an EWS can be an effective diagnostic technique.

JEL Codes: F31, F47, G01

This study identifies the determinants that have an observable impact over the change in carbon dioxide emissions embodied in the production of Indian exports by adopting an index decomposition analysis to address the contribution from four mutually non-exclusive factors which arise due to India’s increasing export performance during the 1995–2009 period on the change in total emissions embodied in exports. These four factors are scale effect, composition effect, emission regulation effect and production efficiency effect. The idea of bringing the last two effects is to capture the impact from technology factor due to international trade. This study found an increased emission embodiment in exports of 234.24 mega-tonnes by using input–output modelling with ‘emissions embodied in bilateral trade’ approach and then applies the Logarithmic Mean Divisia Index-I (LMDI-I)-based additive and multiplicative formulae following Ang and Zhang (2000) and Ang (2004) to conduct the decomposition exercise. This study finds the scale effect as the largest contributing factor increasing the emission levels by more than 184 per cent of the original increase, while the other three effects creating dampening impact over this scale-driven increase. Emission regulation effects created the maximum cleaning-up impact, especially during the 2002–2009 phase.

JEL Codes: C67, F64, Q43, Q48, Q56

This study investigates the determinants of and persistence in access to weapons using a global sample of 163 countries for the period 2010–2015. The empirical evidence is based on the generalized method of moments. Hysteresis in access to weapons is consistently more apparent in countries with below-median levels in access to weapons compared to their counterparts with above-median levels in access to weapons. The hysteresis hypothesis within this context is the propensity of past values of access to weapons to influence future values of access to weapons. Factors that consistently drive access to weapons are: perceptions of crime, criminality, conflict intensity, political instability, military expenditure, violent demonstrations and terrorism. The effects of these drivers are contingent on initial levels of access to weapons. Policy recommendations for managing access to weapons are discussed.

JEL: H56, L64, K42, P50

Among the members of South Asian Free Trade Area (SAFTA), India dominates in terms of its geographical location, land area, population size and economic share. However, SAFTA is treated as a weak agreement as India is highly outward oriented for trade. This raises a question about India’s trade compatibility with South Asian countries. Also since SAFTA is now fully implemented, there is a need to determine its welfare effects for India as well as for the region.

The study focuses on (a) trends and patterns of India’s intra-regional trade with South Asian countries, (b) trade compatibility and (c) welfare effects of SAFTA for the Indian economy. India’s trade intensity, trade share and trade compatibility with the other regional members is calculated. GTAP simulations are used to determine welfare effects. The study is based upon the secondary data.

The study finds that with the implementation of SAFTA, India’s trade intensity and trade share with its regional members has slightly improved. Trade compatibility though low, is gradually improving. The study considers SAFTA as a positive sum game for India. India is likely to have favourable allocative efficiency effect, terms of trade effect and investment-savings effect if trade facilitation measures are adopted.

JEL Codes: F150, F10, F140, C150

The study utilized quarterly time series data for Nigeria and three selected West African Monetary Zone (WAMZ) countries for the period 1980–2016 to verify whether monetary policy shocks emanating from Nigeria are an important source of macroeconomic fluctuations in WAMZ economies. The study complemented the Global vector autoregressive method with the Diebold–Yilmaz (2009) connectedness weights computation for the analysis. Inferences from generalized impulse response function (GIRF) analysis indicated that an unanticipated Nigerian monetary policy shock depreciates the Nigeria–USA exchange rate, stimulates growth, decelerates inflation and expands the money stock in the short run for Nigeria. In Ghana, Nigeria’s monetary policy shocks similarly depreciates the exchange rate, slows growth with high inflationary impact in the short run. In the Gambia, unanticipated shocks emanating from Nigeria strengthens the Gambia–USA exchange rate, depresses growth and inflationary pressures. Sierra Leone shares the appreciation of its currency with the Gambia, in addition to an economic expansion and rising inflation. Money supply also increases to accommodate the expanding demand. These results validated the thesis that there exist considerable geographical linkages within the WAMZ regions through which macroeconomic fluctuations are transmitted. For policy, monetary authorities in the region should collectively address the question of how to stabilize the economy in response to monetary policy shocks emanating from Nigeria.

JEL Codes: E52, E32, E65, F02

India and Iran have a long history of cooperation on various issues ranging from economic to strategic importance. However, the present phase of cooperation is as old as end of the cold war and reached a peak during the period 2001–2003 with the Tehran and Delhi declarations, which established a substantial set of framework for enhanced cooperation. In the present times given the changing regional and global economic and security conditions, many attempts have been made by both countries to increase their cooperation. Since Islamic revolution, Iran faces continuous confrontation and sanctions from the West and the USA. Iran has continuously tried to improve its relations with its neighbours and other friendly countries to minimize the impact of these sanctions which are badly affecting its economy. India, on the other hand, has been growing at a faster pace from last many years which has increased its energy requirements. Given Iran’s nuclear programme and its confrontation with the West and India’s energy requirements, both countries are working together to sustain their economic and energy cooperation from last many years. In 2015, both countries signed a memorandum of understanding worth USD 195 million for the development of Chabahar Port situated in south-eastern Iran and India agreed to make the investment in infrastructural development of Iran. Through this port, India will get easy access to Central Asian and Afghanistan which will increase its trade relations with these countries. The aim of this research article is to examine the impact of sanctions on Iran due to its nuclear programme on trade relations between India and Iran by using threshold autoregressive model and using trade variables including exports and imports.

JEL Codes: 00, 05, 05

The increasing intra-industry trade (IIT) gives an impetus to theoretical foundations of new trade theories. For the empirical assessment, the measurement and segregation of IIT become very essential. On the basis of quality of product, IIT is segregated into two parts. First is based on qualitative differentiation of the products known as vertical IIT (VIIT) and the second is based on the differentiation of the products called as horizontal IIT (HIIT). The work of Greenaway, Hine, and Milner (1994, Weltwirtschaftliches Archiv, 130(1), 77–100), Fontagné and Freudenberg (1997, Intra-industry trade: Methodological issues reconsidered, Paris: Centre d’Études Prospectives et d’Informations Internationales) and Azhar and Elliott (2006, Review of World Economics, 142(3), 476–495) are some of the milestones in the methodological development of IIT. However, these methods are not free from certain shortcomings. Thus, the article attempts to extend the measurement technique with product quality index (PQI) to overcome the existing shortcomings such as arbitrariness of dispersion limit and bias in the classification of IIT into HIIT and VIIT.

JEL Code: F140