An empirical analysis of the Co-movement of Crude, Gold, Rupee-Dollar Exchange rate and Nifty 50 Stock Index during Sub-prime and Coronavirus crisis periods

Rakesh Shahani and Riya Paliwal

MPRA Paper from University Library of Munich, Germany

Abstract: The present study empirically investigates the inter-linkages and co-movement between different asset class namely Crude, Gold, Nifty 50 Stock Index and Rupee-Dollar Exchange Rate during the two crisis periods viz. the Sub-Prime and the Coronavirus Crisis. The methodology employed for ascertaining inter-relationship includes Johansen Co-integration technique and Toda & Yamamoto Causality model. Besides this, the entire model has been set up under the VAR Framework with Variance Decomposition and Impulse Responses giving useful insight into the relationship amongst the stated variables. The results of the study however failed to identify any co-integration amongst the assets during any of the two crisis periods , however there was evidence of short run cause-effect relation amongst some of the variables. The causality flow was uni-directional from Nifty 50 to both crude and exchange rate in Period I(Sub Prime Crisis Period) while in Period II(Coronavirus Crisis Period) it was bi-directional between Gold and Nifty 50. Causality was also seen from Foreign Exchange to Gold in Period II. Further ADF Breakpoint showed all the variables were I(1) stationary and the VAR Model was also proved stable as shown by AR Characteristics Root Plots. The impulses showed that Period II or Coronavirus Crisis Period retained the innovations of other variables for longer periods than Period I ( Sub Prime Period).

Keywords: Sub-Prime Crisis; Coronavirus Crisis; ADF Breakpoint; Co-integration; VAR; Impulse Response (search for similar items in EconPapers)
JEL-codes: G0 G01 G11 G12 G15 Q0 (search for similar items in EconPapers)
Date: 2020-10-14
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