A Study on the GDP Relations between Current Account Balance and Oil Prices on the Trade of BRICS Nations with Special Reference to India

ABSTRACT

This study examined the effects of oil prices on GDP to the international trade of India with the five key fast-growing emerging economies, commonly known as the BRICS Nations: Brazil, Russia, India, China, and South Africa, using a sample of observations from 2010 to 2021. The empirical studys first stage was testing the normality of time series. After that, the impact of oil prices on GDP was examined using the Ordinary Least Square (OLS), Fixed Effect Model (FEM), and Random Effect Model (REM) (REM). To decide between the Fixed Effect Model and the Random Effect Model, the Hausman test was utilised, which has an asymptotic chi-square distribution. Based on the results of the Hausman test, the Fixed Effect Model was considered to be the most appropriate model for the study. Hence dummy variables were used to estimate it. Overall, the findings suggest that the price of oil is related to GDP in a positive way. Rising oil prices have a negative impact on GDP in China (-3.284280) and India (-0.086646), but have a favourable impact on GDP in Russia and Brazil. According to the results of the symmetrical relations test, there is unidirectional causality between Russian current account balances and oil prices, as well as between oil prices and Indias current account balances. The results of the asymmetrical causality test, on the other hand, reveal that shock and other factors have many causal relationships. Positive oil price shocks create positive current account balances shocks in South Africa, China, and Brazil, whereas negative oil price shocks cause negative current account balances shocks in Russia and India Furthermore, all positive and negative oil price shocks are linked to Brazils current account deficits. Its also obvious that Indias positive current account balances shock is causally related to the negative oil price shock. When assessing any strategy, policymakers should consider the impact of oil price shocks on the current account, notably in South Africa, Russia, China, India, and Brazil.

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