Evaluation of the potential impact of exports & imports commodities into the Sri Lankan economy

Abstract

The research attempts to evaluation impact of the Exports and Imports commodities in the country economic. Mainly, following objectives are elaborated, behavior of the exports and imports, to determine which type of commodity is mainly impact to the country economic, to understand theoretically link between the total exports and imports commodities groups and to revisit the total exports and imports groups by investigating hidden factors which are impacting to county economic. The data are collected mainly from 2007 to 2017 monthly basis from Central Bank of Sri Lanka and Census & Statistic Department Sri Lanka. Although total Exports and Imports commodities have been studied with many statistical and economical methods. The researcher has tried to study the similarities of commodities groups and differences. Various statistical techniques have been used such as Basic Statistical, Principle Components (PCA), Factor Analysis (FA) and VARI-MAX Factor Rotation. With the strong based on the preliminary analysis, there are strong correlations among the commodities. This paper is adopted the Principle Component and Factor Analysis to assess eights commodities groups by finding out the level of redundancy among them from the correlations matrix and grouping indicators with higher similarities into the same factors in Exports and Imports separately. According to the similarities, Agriculture Exports, Mineral Exports and Consumer Imports and Investment Goods Imports are categories accurately. But there is no proper grouping for Industrial Exports & Intermediate Imports. Based on the rearrangement of commodities, seven components are identified for Total Exports and eight components are identified for Total Imports according to Factor analysis and improving the results using VARI-MAX Rotations. Also, there are no rapid improvement for all commodities except Garments, Tea and Petroleum sectors. These groups are highly impact to the Gross Domestic Product (GDP) and it need reliable improvement to eliminate the negative impact for country economic. Furthermore, Balance of the Trade is a negative value. When determining which type of commodity is mainly impact to the country economic, Garment & Textile, Tea & Petroleum Products are critical in Export sector. But, there are lack of attention for agriculture sector.