EconPapers    
Economics at your fingertips  
 

Frequency domain causality analysis of stock market and economic activity in India

Aviral Tiwari (), Mihai Ioan Mutascu (), Claudiu Albulescu () and Phouphet Kyophilavong ()

International Review of Economics & Finance, 2015, vol. 39, issue C, 224-238

Abstract: In this study, we analyze the Granger-causality in frequency domain between stock prices and economic growth in India, in order to identify the direction of the causality at different frequencies. For this purpose we use in the first step different seasonal and structural breaks unit root tests. In the second step we use a conditional VAR model as benchmark, and we focus on the conditional and non-conditional frequency domain causality tests. We find evidence of unidirectional causal relationship between stock prices and industrial production in the long-run, running from stock prices to industrial production. When using the non-conditional model, we find evidence of insignificant business cycle causality from both directions. Our study shows that stock prices are a leading indicator for growth in the industrial production in India. In this case, in order to adjust the industrial production in the long-term, the Indian economic policies should be focused with predilection on the stock market environment.

Keywords: Stock market; Economic activity; Frequency domain Granger-causality (search for similar items in EconPapers)
JEL-codes: C32 C53 E4 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1059056015000702
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:39:y:2015:i:c:p:224-238

Access Statistics for this article

International Review of Economics & Finance is currently edited by H. Beladi and C. Chen

More articles in International Review of Economics & Finance from Elsevier
Series data maintained by Dana Niculescu ().

 
Page updated 2017-11-13
Handle: RePEc:eee:reveco:v:39:y:2015:i:c:p:224-238