The Role of Real Exchange Rate in Indias Service Export: Do Remittances Inflows Matter in Post Liberalization-Era?

Title

The Role of Real Exchange Rate in Indias Service Export: Do Remittances Inflows Matter in Post Liberalization-Era?

Creator

Pal S.; Mahalik M.K.

Description

This study assesses the effects of real exchange rate and remittance inflows on India's total service exports, comprising traditional and modern service exports, spanning the annual data from 1990 to 2020. The control variables for the service export function include developments in the banking sector and the stock market and net inflows of foreign direct investment. The ARDL model is the estimating technique of the present study. The real exchange rate has an adverse effect on total, traditional, and modern service exports, according to the long-run outcomes of the ARDL model. Remittance inflows are interestingly shown to support modern service exports while impeding total and traditional service exports. The growth of the banking sector is beneficial for traditional and total service exports, but it has a negative impact on modern service exports. All service exports are benefited by stock market development; however, net FDI inflows negatively impact all forms of service exports. Based on these results, thepolicymakers in India are advised to maximize the effective utilization of remittance inflows in traditional service exports. Additionally, proactive intervention by the central bank is recommended to mitigate the adverse effects of the real exchange rate on traditional and modernservice exports. This study also provides valuable insights for thepolicymakers and practitioners seeking to enhance India's service export performance while navigating the complexities of real exchange rates, remittance inflows, and financial factors. 2024, The Author(s), under exclusive licence to Springer Japan KK, part of Springer Nature.

Source

Asia-Pacific Financial Markets

Date

2024-01-01

Publisher

Springer

Subject

ARDL model; Banking sector development; India; Real exchange rate; Remittance; Service export; Stock market development

Coverage

Pal S., Department of Humanities and Social Sciences, Indian Institute of Technology Kharagpur, West Bengal, Kharagpur, 721302, India, Christ Deemed to be University, Bangalore, India; Mahalik M.K., Department of Humanities and Social Sciences, Indian Institute of Technology Kharagpur, West Bengal, Kharagpur, 721302, India

Rights

Restricted Access

Relation

ISSN: 13872834

Format

Online

Language

English

Type

Article

Identifier

https://doi.org/10.1007/s10690-023-09444-5

https://www.scopus.com/inward/record.uri?eid=2-s2.0-85181659026&doi=10.1007%2fs10690-023-09444-5&partnerID=40&md5=662902cbde5fc270e8224bcca74cd19d