Date Added: Mar 2011
This paper analyzes the sustainability of the trade deficits in the two giant economies of Asia, namely India and China with allowance of endogenous structural breaks. The authors found that trade deficit is sustainable in case of India but not in case of China. This implies that macroeconomic policies of India but not of China have been effective in leading exports and imports to long run steady state equilibrium relationship. Imports and exports are two important elements of the Balance Of Payments (BOPs) of any country. Developing countries receive a major share of their Gross National Product (GNP) from the export of agricultural, agri-related and other primary commodities.