Macroeconomic Variables and Stock Prices in India: An Empirical Analysis

T Sampath

The IUP Journal of Monetary Economics, 2011, vol. IX, issue 4, 43-55

Abstract: The study analyzes the effect of macroeconomic variables such as real effective exchange rate, wholesale price index and index of industrial production on the stock prices in the post-liberalization period in India. The study employs the latest technique of Autoregressive Distributed Lag (ARDL) approach to cointegration. ARDL approach has been applied as it yields consistent estimates of the long-run coefficients that are asymptotically normal irrespective of whether the regressors are I(0) or I(1). The results reveal that real effective exchange rate, wholesale price index and index of industrial production have statistically significant long-run effect on stock prices. The error correction model based on ARDL approach captures the short-term dynamics of stock prices and confirms that changes in real effective exchange rate, wholesale price index and index of industrial production significantly affect stock prices in the short term. The study finds a significant positive relationship between economic growth and stock prices in India.

Date: 2011
References: Add references at CitEc
Citations: View citations in EconPapers (1)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

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:icf:icfjmo:v:09:y:2011:i:4:p:43-55

Access Statistics for this article

More articles in The IUP Journal of Monetary Economics from IUP Publications
Bibliographic data for series maintained by G R K Murty ().