Journal of Economics and Business

ISSN 2615-3726 (Online)

ISSN 2621-5667 (Print)

Published: 26 May 2020

An Analysis of Interaction among Macroeconomic Variables through Cointegration and Causality Approach

Khalid Ashraf Chisti, Saila Shakeel, Khursheed Ali Ganai

University of Kashmir Srinagar, Jammu & Kashmir Bank Financial Services Ltd., Higher Colleges of Technology

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Pages: 811-824

Keywords: Crude Oil Prices, FIIs, Nifty-50, Granger Causality


This paper aims at examining the relationship between stock market prices (Nifty 50) India & macroeconomic variables (Exchange rate, Foreign Institutional Investment and Crude oil prices) for the period 2007-08 Q1 to 2017-18 Q3. In order to achieve the objectives of the study, the researchers employed Granger Causality, multiple regression and Johansen’s Cointegration test. The results confirmed that there is a unidirectional relationship between crude oil prices and stock prices. Further the study confirms that FII and Oil prices are individually capable of influencing stock prices. Johansen’s Cointegration test exhibits the absence of long run relationship between stock prices and macroeconomic variables (Exchange Rate and Oil prices). However, the findings put forth by the present study affirmed that Foreign Institutional Investment and Oil prices are capable of individually influencing Stock prices of Nifty 50. The null hypothesis of regression model, that is, macroeconomic variables have no impact on stock prices has been rejected because the f-statistic shows that the macroeconomic variables have statistically significant relationship with stock prices (Nifty 50).


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