Year: 2016 | Month: June and December | Volume 2 | Issue 2
Liberalizing Trade in Services and Economic Growth in India During Post Reformed Period: A Quantitative Analysis using Granger Causality Test in a Vector Autoregressive Framework
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Abstract:
The study seeks to examine the causal relationship, if any, between India’s services trade and economic growth, in a Vector Auto Regressive (VAR) framework during the post-liberalization period. A simple regression model is used to predict whether services trade influences economic growth for the time period 1996-97: Q1 to 2014-15:Q2. In order to examine the causal linkages between the variables, the Granger Causality Test has been conducted. Service trade plays a crucial role in developing countries where proportionately higher services export are characteristics of high-growth countries while excessive dependency on imported services is characteristic of low growth countries. Effective development planning must include strengthening of both domestic and international service sectors to reduce relative dependency on imported services while providing incentives for services exports.
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