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Analysis of Interaction between Global Crude Oil Price, Exchange Rate, Inflation and Stock Market in India:Vector Auto Regression Approach


Affiliations
1 Department of Business Management, C.V. Raman College of Engineering, Bhubaneswar, PIN: 752054, India
2 Department of Business Administration, Utkal University, Bhubaneswar, 751004, India
 

The present paper analyses the association between global crude oil price, exchange rate, inflation and stock market in Indian economic scenario. The paper employs Vector Auto Regression Model on monthly data from April 2001 to March 2017. The monthly data has been sourced from official website of Energy Information Agency (EIA), Reserve Bank of India (RBI) and Bombay Stock Exchange (BSE). The analysis reveals the variables being integrated of Order I (1) and negates the possible existence of long run relationship among them. The analysis shows the negative relationship between stock index and inflation and positive association with exchange rate and WTI crude oil price. The paper also indicates the indicates the WTI crude oil price increase cause increase in inflation and exchange rate depreciation. Although the increase in WTI crude oil price has a favourable impact on BSE Index, the paper necessitates the need of decrease in reliance upon crude oil price so as to curb the increase in inflation and exchange rate depreciation. The policymakers need to devise policies to keep control on the increase in inflation and conserve the foreign exchange.

Keywords

WTI, Inflation, Exchange Rate, Vector Auto Regression Model.
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  • Analysis of Interaction between Global Crude Oil Price, Exchange Rate, Inflation and Stock Market in India:Vector Auto Regression Approach

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Authors

Shekhar Mishra
Department of Business Management, C.V. Raman College of Engineering, Bhubaneswar, PIN: 752054, India
Sathya Swaroop Debasish
Department of Business Administration, Utkal University, Bhubaneswar, 751004, India

Abstract


The present paper analyses the association between global crude oil price, exchange rate, inflation and stock market in Indian economic scenario. The paper employs Vector Auto Regression Model on monthly data from April 2001 to March 2017. The monthly data has been sourced from official website of Energy Information Agency (EIA), Reserve Bank of India (RBI) and Bombay Stock Exchange (BSE). The analysis reveals the variables being integrated of Order I (1) and negates the possible existence of long run relationship among them. The analysis shows the negative relationship between stock index and inflation and positive association with exchange rate and WTI crude oil price. The paper also indicates the indicates the WTI crude oil price increase cause increase in inflation and exchange rate depreciation. Although the increase in WTI crude oil price has a favourable impact on BSE Index, the paper necessitates the need of decrease in reliance upon crude oil price so as to curb the increase in inflation and exchange rate depreciation. The policymakers need to devise policies to keep control on the increase in inflation and conserve the foreign exchange.

Keywords


WTI, Inflation, Exchange Rate, Vector Auto Regression Model.

References





DOI: https://doi.org/10.23862/kiit-parikalpana%2F2018%2Fv14%2Fi1%2F173252