Agricultural Export and Exchange Rates in India: The Granger Causality Approach

This paper is an attempt to investigate the causal relationships among quantity of agricultural export and real exchange rate in India by using time series data for the period between 1980 and 2010. All the macroeconomic series used here are non-stationary, integrated at order one but not co-integrated. The long run relationships between exchange rates and agricultural export were explored by using co-integration analysis. A Granger-causality analysis has been carried out in order to assess whether there is any potential predictability power of one indicator for the other. The finding shows that there is no significant relationship between quantity of agricultural export and real exchange rate. In Other words, both the variables do not cause each other in either direction. The result also shows that the variables are not co-integrated, so there is no the long run relationship between agricultural export and exchange rates in India.