The Study of Co-integration and Direction of Causality among International Trade, GDP and Foreign Exchange Rate in India

India’s international trade is growing at a faster rate compared to the growth of GDP over the past two decades. As a result the ratio of international trade to GDP has gone up over the years. The magnitude of India’s international trade is usually dependent on several macroeconomic factors. GDP is one of them. A large number of factors are responsible for effecting country’s trade in a significant manner. To find out the impact of these factors in international trade the current study has been undertaken. The paper focuses on India’s international trade dynamics under the influence of taken macroeconomic variables. The paper aims to investigate the possible co-integration and direction of causality among Gross domestic product, international trade, and exchange rate in India (for the period of 1991-2018).Granger causality tests among international trade, GDP and foreign exchange rate (Indian rupee vs US $) has been appliedafter employing Phillip Perron test to check unit root in the series. Vector Auto regression test has been conducted to check the impact of lags (till lag 2) of taken variables on each other and OLS regression has been used to create the Model of international under taken variables.