India's trade with USA and her trade balance: An empirical analysis

This study explores the affect of India's exchange rate with US on Indian trade balance over the period of 1965-2008. We use ARDL bounds testing approach to cointegration and for dynamic analysis IRFs and VDs. For dynamic analysis impulse response functions and variance decompositions are used. We find cointegrating relationship among the tested variable, positive impact of depreciation in Indian rupee against US dollar and trade policies in previous period on Indian trade balance while an negative impact of money supply and economic growth on trade balance in short span of time. Moreover, J-curve is validated in case of India with US.