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Inter-Linkage between Macroeconomic Variables and Stock Indices: Using Granger Causality & Co-Integration Approach

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Inter-Linkage between Macroeconomic Variables and Stock Indices: Using Granger Causality & Co-Integration Approach


Dr. Amit Manglani | Mr. Suraj Patel



Dr. Amit Manglani | Mr. Suraj Patel "Inter-Linkage between Macroeconomic Variables and Stock Indices: Using Granger Causality & Co-Integration Approach" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-6 | Issue-6, October 2022, pp.694-701, URL: https://www.ijtsrd.com/papers/ijtsrd51868.pdf

As exchange rate and GDP are the important factors which influence the behavior of stock market. In this study we have examined the Co-integration between macroeconomic variables and Indian stock market and causality between exchange rate and GDP with stock return. We have applied 42years data on yearly basis for GDP, exchange rate and stock return and applied ADF test for checking Stationarity, Correlogram for serial correlation, Johansen Co-integration for association and Granger causality test for examine multiple causal relation by controlling the effects of other variables, then Impulse Response Function used for checking the responsiveness of a time series to unexpected shocks in other time series. The study found that exchange rate significantly granger causes the stock return Indian stock market and long run co-integration found to be significant in amongst the selected variables.

Stock Return, Stationarity, Granger Causality, and Variance Decomposition Analysis


IJTSRD51868
Volume-6 | Issue-6, October 2022
694-701
IJTSRD | www.ijtsrd.com | E-ISSN 2456-6470
Copyright © 2019 by author(s) and International Journal of Trend in Scientific Research and Development Journal. This is an Open Access article distributed under the terms of the Creative Commons Attribution License (CC BY 4.0) (http://creativecommons.org/licenses/by/4.0)

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