Time varying dynamics of globalization effect in India
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Time varying dynamics of globalization effect in India Shikha Gupta 1
& Nand
Kumar 1
Received: 4 August 2020 / Accepted: 18 November 2020/ # ISEG – Instituto Superior de Economia e Gestão 2020
Abstract The link between globalization and economic growth is getting complex as the propagators of globalization are opting protectionism. The paper attempts to identify the time-varying dimension of globalization in India from Q2 1996 to Q3 2019. The aim is to capture the portion of growth explained by domestic and foreign factors suggesting the pace of globalization. The factor-induced domestic and foreign loadings are used in Time-Varying Parameter Regression and Time-Varying Parameter Autoregressive approach to indicate the evidence for slowbalization in India. The models combined with stochastic volatility, aid in capturing the structural changes in the economy in a robust manner. Keywords Time-varying parameter estimations . Globalization . Economic growth .
Slowbalization JEL classification C110 . C520 . C820 . F620 . F690 . F630
1 Introduction Whether globalization brings cost or benefits to an economy, has always been a hot topic among researchers. Globalization, in simple words, can be explained as the integration of economies across the world. However, in the recent past, we have seen a reversal of the phenomenon. The economies which were once the propagators of the globalization are opting for protectionism and nationalism. A dearth of literature is available reflecting the impact of globalization on economic growth using various time series tools and techniques. However, the dynamics of globalization cannot be studied without considering structural changes. Vector Autoregression models have been widely used in literature to address modelling and forecasting. * Shikha Gupta [email protected]
1
Discipline of Economics, Department of Humanities, Delhi Technological University, Delhi, India
S. Gupta, N. Kumar
Our study aims to identify the time-varying dynamics of globalization in India. We estimate it by analyzing the portion of growth explained by foreign factors and domestic factors. We observe that the time-varying coefficients of the foreign factors have been increasing but at a marginal rate since the Global Financial Crisis (GFC) 2008. The results provide evidence for a slower pace of globalization, and, hence, indicate ‘slowbalization’. The term Slowbalization, was proposed by Bakas, a Dutch blogger, in 2015, who defined it as a slower pace of globalization with international linkages turning regional rather than global. The challenge is to model the data series to produce timely and robust forecasts using macroeconomic indicators, as these indicators are subject to rapid structural change exhibiting possibility of the structural break and policy changes (Liu et al. 2012; Maier 2011). To examine this, we estimate two models; one, using TimeVarying Parameter Regression (TVP-R model) and the other using Time-Varying Parameter Vector Autoregressive model (TVP-VAR model). The models are estimated
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