TITLE:
Macroeconomic Link to Indian Capital Market: A Post-Liberalization Evidence
AUTHORS:
Hirak Ray, Joy Sarkar
KEYWORDS:
Stock Market, Macroeconomic Variables, Cointegration, Causality, Impulse Response Analysis, Forecast Error Variance Decomposition Analysis
JOURNAL NAME:
Modern Economy,
Vol.5 No.4,
April
3,
2014
ABSTRACT: The present paper attempts
to investigate the dynamic relation between the stock market and the select macroeconomic
variables at log-levels, in India, for the period 1991:01 to 2008:04. Findings of
the study show that the long-run stock market behavior is positively related to
output and exchange rate, and negatively related to short- and long-term interests,
money supply and inflation. The results of the causality and innovation analysis
suggest that the stock market influences the economic activities, more specifically
the industrial activities and the market is expected to be more sensitive to the
shocks of itself over the projected period of the study.