Menu Expand
  1. Journals
  2. Economics, Finance, Business & Management
  3. Applied Economics Quarterly
  4. Vol. 67, Issue 1
  5. pp. 47–70

JOURNAL ARTICLE

Cite JOURNAL ARTICLE

Style
Kaushal, L. Estimating the Impact of Free Trade Agreements on India’s Export Potential. Applied Economics Quarterly, 67(1), 47-70. https://doi.org/10.3790/aeq.67.1.47
Kaushal, Leena Ajit "Estimating the Impact of Free Trade Agreements on India’s Export Potential" Applied Economics Quarterly 67.1, , 47-70. https://doi.org/10.3790/aeq.67.1.47
Kaushal, Leena Ajit: Estimating the Impact of Free Trade Agreements on India’s Export Potential, in: Applied Economics Quarterly, vol. 67, iss. 1, 47-70, [online] https://doi.org/10.3790/aeq.67.1.47
Format
Download

Estimating the Impact of Free Trade Agreements on India’s Export Potential

Kaushal, Leena Ajit

Applied Economics Quarterly, Vol. 67 (2021), Iss. 1 : pp. 47–70

Preview Login to order (PDF)

Additional Information

Article Details

Publisher Name
Duncker & Humblot
DOI
https://doi.org/10.3790/aeq.67.1.47
Language
German
Pages
24
Keywords

Pricing

Individual
€ 24.00 (incl. local VAT if applicable)

Author Details

Leena Ajit Kaushal, Corresponding Author. Management Development Institute Gurgaon, Mehrauli Road, Sukhrali, Gurgaon, Haryana, India.

References

  1. Abdullahi, N. M./Aluko, O. A./Huo, X. (2021): “Determinants, efficiency and potential of agri-food exports from Nigeria to the EU: Evidence from the stochastic frontier gravity model,” Agricultural Economics 67(8), 337–349.  Google Scholar
  2. Aigner, D./Lovell, C. K./Schmidt, P. (1977): “Formulation and estimation of stochastic frontier production function models,” Journal of Econometrics 6(1), 21–37.  Google Scholar
  3. Anderson, J. E. (1979): “A theoretical foundation for the gravity equation,” The American Economic Review 69(1), 106–116.  Google Scholar
  4. Apanisile, O. T./Oloba, O. M. (2020): “Asymmetric effect of exchange rate changes on cross-border trade in Nigeria,” Future Business Journal 6(1), 1–9.  Google Scholar
  5. Armstrong, S. P. (2007): “Measuring trade and trade potential: A survey,” Crawford School Asia Pacific Economic Paper, (368).  Google Scholar
  6. Atif, R. M./Mahmood, H./Haiyun, L./Mao, H. (2019): “Determinants and efficiency of Pakistan’s chemical products’ exports: An application of stochastic frontier gravity model,” PloS one, 14(5).  Google Scholar
  7. Baier, S. L./Bergstrand, J. H. (2007): “Do free trade agreements actually increase members’ international trade?,” Journal of International Economics 71(1), 72–95.  Google Scholar
  8. Baltas, G. (2005): “Exploring consumer differences in food demand: a stochastic frontier approach,” British Food Journal 107(9), 685–692.  Google Scholar
  9. Banga, R. (2006): “The export-diversifying impact of Japanese and US foreign direct investments in the Indian manufacturing sector,” Journal of International Business Studies, 37(4), 558–568.  Google Scholar
  10. Bartesagi, I. (2020): “India’s relations with Mercosur: A weak trade relationship with great potential,” available at: https://diplomatist.com/2020/01/03/indias-relations-with-mercosur-a-weak-trade-relationship-with-great potential/#:~:text=India’s%20imports%20from%20Mercosur%20are,%2C%20it%20is%20only%201%25.  Google Scholar
  11. Battese, G. E./Coelli, T. J. (1995): “A model for technical inefficiency effects in a stochastic frontier production function for panel data,” Empirical Economics 20(2), 325–332.  Google Scholar
  12. Bhattacharyya, R./Mukherjee, J. (2014): “Do exchange rates affect exports in India?,” South Asian Journal of Macroeconomics and Public Finance 3(2), 175–193.  Google Scholar
  13. Carrère, C. (2006): “Revisiting the Effects of Regional Trade Agreements on Trade Flows with Proper Specification of the Gravity Model,” European Economic Review 50 (2), 223–247.  Google Scholar
  14. Centorrino, S./Pérez-Urdiales, M. (2020): “Maximum Likelihood Estimation of Stochastic Frontier Models with Endogeneity,” Mimeo – Stony Brook University.  Google Scholar
  15. Cipollina, M./Salvatici, L. (2010): “Reciprocal Trade Agreements in Gravity Models,” Review of International Economics, 18 (1), 63–80.  Google Scholar
  16. Clark, P. B./Wei, S. J./Tamirisa, N. T./Sadikov, A. M./Zeng, L. (2004). “A new look at exchange rate volatility and trade flows,” International Monetary Fund.  Google Scholar
  17. Dadakas, D./Ghazvini Kor, S./Fargher, S. (2020): “Examining the trade potential of the UAE using a gravity model and a Poisson pseudo maximum likelihood estimator,” The Journal of International Trade & Economic Development, 29(5), 619–646.  Google Scholar
  18. Das, J./Tanger, S. M./Kennedy, P. L./Vlosky, R. P. (2018): “Examining the Relationship between Regulatory Quality and Forest Product Exports to India: A Gravity Model Approach,” Forest Products Journal, 68(2), 172–181.  Google Scholar
  19. Drummond, D. (2015): “Progress on the mystery of productivity,” A review article on the OECD report – The Future of Productivity, International Productivity Monitor, 29, 83.  Google Scholar
  20. Dunning, J. H. (1998): “The Changing Geography of Foreign Direct Investment,” in: Globalization, Foreign Direct Investment and Technology Transfer: Impact on and Prospects for Developing Countries, edited by N. Kumar, et al., 43–90. London: Routledge.  Google Scholar
  21. Ghoshal, I. (2015): “Trade-growth relationship in India in the pre and post trade agreements regime,” Procedia Economics and Finance, 30, 254–264.  Google Scholar
  22. Glaeser, E. L./Kohlhase, J. E. (2004): “Cities, regions and the decline of transport costs. In fifty years of regional science,” Springer, Berlin, Heidelberg, 197–228.  Google Scholar
  23. Gopinath, G./Itskhoki, O./Rigobon, R. (2010): “Currency choice and exchange rate pass-through,” American Economic Review 100(1), 304–36.  Google Scholar
  24. Gylfason, T. (1999): “Exports, inflation and growth,” World Development 27(6), 1031–1057.  Google Scholar
  25. Hannan, S. A. (2016): “The Impact of Trade Agreements: New Approach, New Insights,” International Monetary Fund.  Google Scholar
  26. Joumard, I./Arriola, C./Dek, M. (2020): “Challenges and opportunities of India’s enhanced participation in the global economy,” OECD Economics Department Working Papers, No. 1597, OECD Publishing, Paris.  Google Scholar
  27. Jung, W. S./Marshall, P. J. (1985): “Exports, growth and causality in developing countries,” Journal of development economics, 18(1), 1–12.  Google Scholar
  28. Kalirajan, K. (2007): “Regional cooperation and bilateral trade flows: an empirical measurement of resistance,” The International Trade Journal, 21(2), 85–107.  Google Scholar
  29. Karagiannis, G./Tzouvelekas, V. (2009): “Measuring technical efficiency in the stochastic varying coefficient frontier model,” Agricultural Economics, 40(4), 389–396.  Google Scholar
  30. Kumar, S./Kumar, S. (2015): “Does modernization improve performance: evidence from Indian police,” European Journal of Law and Economics, 39(1), 57–77.  Google Scholar
  31. Kumar, S./Prabhakar, P. (2017): “India’s trade potential and free trade agreements: a stochastic frontier gravity approach,” Global Economy Journal, 17(1).  Google Scholar
  32. Leite, D./Pessanha, J./Simões, P./Calili, R./Souza, R. (2020): “A stochastic frontier model for definition of non-technical loss targets,” Energies, 13(12), 3227.  Google Scholar
  33. Liu, S./Xiao, W./Li, L./Ye, Y./Song, X. (2020): “Urban land use efficiency and improvement potential in China: A stochastic frontier analysis,” Land Use Policy, 99, 105046.  Google Scholar
  34. McKinsey, (2020): “A new growth formula for manufacturing in India,” available at: https://www.mckinsey.com/industries/advanced-electronics/our-insights/a-new-growth-formula-for-manufacturing-in-india.  Google Scholar
  35. Meeusen, W./van Den Broeck, J. (1977): “Efficiency estimation from Cobb-Douglas production functions with composed error,” International Economic Review, 435–444.  Google Scholar
  36. Miankhel, A. K./Thangavelu, S./Kalirajan, K. (2009): “On modeling and measuring potential trade,” Indira Gandhi Institute of Development Research Proceeding, Project Reports Series.  Google Scholar
  37. Mohammadi, H./Aminizadeh, M./Aghasafari, H. (2020): “Measuring the export efficiency of Iran’s pistachio using stochastic frontier gravity model,” Journal of Agricultural Economics and Development, 34(1), 29–45.  Google Scholar
  38. Mukherjee, A./Kapoor, A. (2017): “India and Trade Facilitation in Services (TFS) Agreement: concerns and way forward,” Working Paper, No. 347.  Google Scholar
  39. Nguyen, D. D. (2020): “Determinants of Vietnam’s rice and coffee exports: using stochastic frontier gravity model,” Journal of Asian Business and Economic Studies.  Google Scholar
  40. Njoroge, L. (2020): “The Effects of Exchange Rate Volatility on Exports in COMESA: A Panel Gravity Model Approach,” Journal of Applied Finance and Banking, 10(6), 203–223.  Google Scholar
  41. OECD (2013): “Interconnected economies – benefiting from global value chains,” OECD Publishing, Paris.  Google Scholar
  42. Panagariya, A. (2020): India unlimited: Reclaiming the lost glory. Harper Collins.  Google Scholar
  43. Papadimitriou, M./Johnes, J. (2019): “Does merging improve efficiency? A study of English universities,” Studies in Higher Education, 44(8), 1454–1474.  Google Scholar
  44. Rahman, M. M. (2009): “Australia’s global trade potential: evidence from the gravity model analysis, in: proceedings of the 2009 Oxford Business and Economics Conference (OBEC 2009), 1–41, Oxford University Press.  Google Scholar
  45. Rahman, M. M. (2010): “Exploring Australia’s global trade potential: a gravity approach with panel data,” in: proceedings of the 6th International Conference of Global Academy of Business & Economic Research, Global Academy of Business & Economic Research.  Google Scholar
  46. Rahman, K. M. M./Mia, M. I. A./Bhuiyan, M. K. J. (2012): “A stochastic frontier approach to model technical efficiency of rice farmers in Bangladesh: An empirical analysis,” The Agriculturists, 10(2), 9–19.  Google Scholar
  47. Rahman, M./Shadat, W. B./Das, N. C. (2006): “Trade potential in SAFTA: An application of augmented gravity model,” CPD occasional paper series, 61, 512.  Google Scholar
  48. Ravishankar, G./Stack, M. M. (2014): “The Gravity Model and Trade Efficiency: A Stochastic Frontier Analysis of Eastern European Countries’ Potential Trade,” The World Economy, 37(5), 690–704.  Google Scholar
  49. Rodrik, D. (2018): “What do trade agreements really do?,” Journal of Economic Perspectives, 32(2), 73–90.  Google Scholar
  50. Sikdar, C./Nag, B. (2011): “Impact of India-ASEAN Free Trade Agreement: A cross-country analysis using applied general equilibrium modelling,” Working Paper Series No. 107.  Google Scholar
  51. Silva, J. M. C. S./Tenreyro, S. (2006): “The log of gravity,” Review of Economics and Statistics, 88, 641–658.  Google Scholar
  52. Sultan, Z. A. (2013): “A causal relationship between FDI inflows and export: The case of India,” Journal of Economics and Sustainable Development, 4(2), 1–9.  Google Scholar
  53. Taneja/Nisha/Prakash D./Kalita. P. (2013): “India’s role in facilitating trade under SAFTA,” Working Paper No. 263.  Google Scholar
  54. Tinbergen, J. (1962): Shaping the World Economy, The Twentieth Century Fund. New York, 330.  Google Scholar
  55. Titus, M. A./Eagan, K. (2016): “Examining production efficiency in higher education: The utility of stochastic frontier analysis,” in: Higher education: Handbook of theory and research, 441–512, Springer, Cham.  Google Scholar
  56. Todaro, M. P./Smith S. C. (2006): Economic Development, 9th ed. Upper Saddle River, NJ: Pearson Education.  Google Scholar
  57. UNCTAD, (2003): “Dispute Settlement-Technical Barriers to Trade,” available at: https://unctad.org/system/files/official-document/edmmisc232add22_en.pdf.  Google Scholar
  58. Wahyuningsih, D. (2021): “Trade flow of manufacturing sector and foreign direct investment in ASEAN economic integration: the gravity model of trade,” Journal Perspektif Pembiayaan dan Pembangunan Daerah, 8(6), 619–630.  Google Scholar
  59. Wang, H. J./Schmidt, P. (2002): “One-step and two-step estimation of the effects of exogenous variables on technical efficiency levels,” Journal of Productivity Analysis, 18(2), 129–144.  Google Scholar
  60. Xie, Y. D./Baek, Y. (2020): “Impact of Exchange Rate and Firm Heterogeneity on Exports,” Journal of Southeast Asian Economies, 37(2), 199–223.  Google Scholar
  61. Zheng, P. (2009): “A comparison of FDI determinants in China and India,” Thunderbird International Business Review, 51(3), 263–279.  Google Scholar
  62. Zheng, B./Wang, Y./Kamal, M. A./Ullah, A. (2020): “The influence of cultural and institutional distance on China’s OFDI efficiency: fresh evidence from stochastic frontier gravity model,” International Journal of Emerging Markets (ahead-of-print), DOI:10.1108/IJOEM-10-2019-0789.  Google Scholar

Abstract

The study examines the role of trade agreements (TA) in determining merchandise export efficiency in India using the stochastic frontier gravity model. We estimate the impact of select trade agreements (bilateral, SAFTA, APTA, ASEAN, and MERCOSUR), regulatory quality, and FDI inflow on India’s export efficiency in the period 2002–2018. Results suggest that TAs have enhanced India’s merchandise export efficiency to its trading partners except for the MERCOSUR bloc. However, substantial potential is still untapped. The study finds that the regulatory quality (RQ) of importing nations does not enhance India’s export efficiency. Moreover, the RQ of India is promising but not significantly promoting exports. The study suggests that India should further liberalize its existing trade agreements, harmonize and improve regulatory standards facilitating cross-border trade and export-oriented FDI, and undertake trade access to top-consuming markets to achieve its full export potential.

Table of Contents

Section Title Page Action Price
Leena Ajit Kaushal: Estimating the Impact of Free Trade Agreements on India’s Export Potential 1
Abstract 1
1. Introduction 1
2. Review of the Literature 3
3. Methodology 5
4. Data & Model Specification 7
5. Empirical Findings & Discussion 1
6. Conclusion 1
References 1
Appendix 2

Contact

Duncker & Humblot GmbH Carl-Heinrich-Becker-Weg 9 12165 Berlin, Deutschland T: +49 30 790006-0

Quick Navigation

2024 Duncker & Humblot GmbH

Powered by CloudPublish

We use cookies to ensure that you get the best experience on our website. Learn more about how we use cookies.