A Dynamic Relationship Between Us Dollar Exchange Rate And Indian Crude Oil Prices
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| Author | : Dr. Arpit Sidhu |
| Publisher | : |
| Total Pages | : 8 |
| Release | : 2020 |
| Genre | : |
| ISBN | : |
Present paper investigates the relationship among oil prices and exchange rates in Indian market. Present paper uses two econometrics tools of dependence to establish co-movement amongst the variables viz. Johansen co-integration and Granger Causality tests to demonstrate that the foreign exchange value of the US dollar (Crude oil prices) has a substantial impact on the prices of crude oil (Exchange rate of US dollar) in long-term as well as short-term or not. The results evidenced that data is stationary at first difference order. However, Johansen co-integration suggests no co-integrating equation. It signifies the possibilities to take advantage from arbitrage activities in the long-run through diversification of the investment portfolios in these two non-integrated markets. Granger causality and Wald statistics evidences unidirectional causality flowing from exchange rate to oil prices but not vice-versa. Since exchange rate granger causes the oil prices, the participants in the foreign exchange market can use information of exchange rates to improve the forecast of crude oil prices. The results of present study have policy implications for oil importing countries to frame foreign exchange risk management, fiscal and monetary policies in such a way to control exchange rate induced pressures on crude oil prices as crude oil prices predominantly affect the emerging oil dependent industrialized economies like India.
| Author | : Bhaskar Bagchi |
| Publisher | : Emerald Group Publishing |
| Total Pages | : 225 |
| Release | : 2016-11-01 |
| Genre | : Business & Economics |
| ISBN | : 1786355531 |
This book examines the dynamic relationship and volatility spillovers between crude oil prices, exchange rates and stock markets of emerging economies. Unfortunately very little research has been conducted to analyze the volatility spillovers and dynamic relationship between crude oil prices, exchange rates and stock markets of India.
| Author | : Sanjeeta Shirodkar |
| Publisher | : |
| Total Pages | : 9 |
| Release | : 2020 |
| Genre | : |
| ISBN | : |
This paper has made an attempt to evaluate the combined impact of crude oil prices and exchange rate on the performance of Indian stock market. As the impact of dollar nominated oil prices on stock prices may not be quite relevant for Indian context. Therefore, in this study WTI Crude oil prices per Dollars along with the USD/Rupee exchange rate would be more meaningful and relevant to understand the impact of oil prices on stock market by using monthly data from 2003 to 2016 for S&P CNX Nifty Index, WTI Crude oil prices per Barrel (Dollars) and Dollar/Rupee Exchange rate. All the series were found to be stationery at First difference. The Granger causality tests revealed that there exists a Bi directional causality between stock prices and exchange rates in the short run i.e. stock prices lead exchange rates in the short run, but result of Johansen cointegration suggested that there is no long run relationship between these two financial variables. The results of the Johansen cointegration test suggest absence of any long term relationship between WTI crude oil price, USD/Rupee exchange rate and stock prices in India. The result of forecast error variances suggested that USD/Rupee exchange rate is influenced by Stock market performance. The forecast error variances of USD/Rupee exchange rate is significantly explained by the value of Nifty. Results also indicate that the values of oil price and exchange rate are comparatively less exogenous than the Indian stock market. Particularly, the contribution of Stock market shocks to the USD/Rupee exchange rate is greater than that of WTI Crude oil price shocks in all the periods.
| Author | : Saurabh Singh |
| Publisher | : |
| Total Pages | : 13 |
| Release | : 2016 |
| Genre | : |
| ISBN | : |
This paper attempts to investigate empirically the dynamic relationship among crude oil price, exchange rate and Indian stock market. Using daily data of Crude oil price, Dollar-Rupee value and Nifty returns from April 2010 to March 2015, correlation, regression and Granger-causality approach in a bi-variate VAR framework has been used to investigate the causality between crude oil and nifty returns; exchange rate and nifty returns. Augmented Dickey Fuller (ADF) test has been used to test whether the data is stationary or not. The outcome of the study was there is a significant negative correlation between nifty returns and exchange rate and significant positive correlation between nifty returns and crude oil, and a unidirectional causality running from nifty returns to exchange rates and crude oil price to nifty returns.
| Author | : James K. Jackson |
| Publisher | : DIANE Publishing |
| Total Pages | : 23 |
| Release | : 2008 |
| Genre | : |
| ISBN | : 1437931464 |
This report analyzes the relationship between the dollar and the price of oil and how the two might interact. This report provides an assessment of the impact a range of prices of imported oil could have on the U.S. trade deficit.
| Author | : Mr. Kangni R Kpodar |
| Publisher | : International Monetary Fund |
| Total Pages | : 34 |
| Release | : 2021-11-12 |
| Genre | : Business & Economics |
| ISBN | : 1616356154 |
This paper investigates the response of consumer price inflation to changes in domestic fuel prices, looking at the different categories of the overall consumer price index (CPI). We then combine household survey data with the CPI components to construct a CPI index for the poorest and richest income quintiles with the view to assess the distributional impact of the pass-through. To undertake this analysis, the paper provides an update to the Global Monthly Retail Fuel Price Database, expanding the product coverage to premium and regular fuels, the time dimension to December 2020, and the sample to 190 countries. Three key findings stand out. First, the response of inflation to gasoline price shocks is smaller, but more persistent and broad-based in developing economies than in advanced economies. Second, we show that past studies using crude oil prices instead of retail fuel prices to estimate the pass-through to inflation significantly underestimate it. Third, while the purchasing power of all households declines as fuel prices increase, the distributional impact is progressive. But the progressivity phases out within 6 months after the shock in advanced economies, whereas it persists beyond a year in developing countries.
| Author | : Tarak Nath Sahu |
| Publisher | : |
| Total Pages | : 14 |
| Release | : 2017 |
| Genre | : |
| ISBN | : |
Oil is one of the most important forms of energy and is a significant determinant of global economic performance. Commodities like oil are fairly homogeneous and internationally traded. The impact of dollar nominated oil prices on stock prices may not be quite relevant for Indian context. In this context, the study of crude oil prices in dollar terms along with the exchange rate would be more meaningful to understand the impact of oil prices on stock market. The study investigates the dynamic relationships between oil price, exchange rate and Indian stock market during 1993 to 2013. The estimated results of the Johansen's cointegration test and vector error correction model suggest that there exist a long run cointegrating relationships between crude oil price and Indian stock indices, but it cannot be said with sufficient confidence that the direction of the relation in the long run is from the oil price to the Sensex. The Granger causality test also reveals that the volatility of stock prices in India can be explained to cause the movement of oil price and exchange rate in short run. The observed relationship between oil price and stock indices is not due to the effect of the exchange rate fluctuations, because the change in exchange rate has no significant impact on oil prices or stock prices in India during the study period. The variance decomposition analysis reveals that the Indian stock prices are strongly exogenous in the sense that the crude oil price or exchange rate explains only a very small portion of the forecast variance error of the market index. Finally, from the impulse response functions analysis it is noticed that a positive shock in one variable have a persistent and prolonged effect on other variables.
| Author | : Vanita Tripathi |
| Publisher | : |
| Total Pages | : 28 |
| Release | : 2015 |
| Genre | : |
| ISBN | : |
This paper examines the long run and short run dynamics among oil prices, exchange rates and stock prices in India (one of the fastest growing emerging markets in the world) over the most recent 15 year period 1997-2011. Using Johansen's Co integration test we find the existence of long run equilibrium relationship among oil market, foreign exchange market and stock market in India. The short term dynamics among the three markets are analyzed using Vector Autoregression (unrestricted as well as VECM), VAR causality/Block Exogeneity Wald test and Impulse response analysis. We find unidirectional causality from stock market to oil market. An impulse originating in foreign exchange market results in a profound drop in stock as well as oil prices and is statistically significant for about three weeks in oil market and two weeks in stock market. The domino effect of up-waves in stock market is positive for oil market and remains statistically significant for few weeks, while being of opposite tendency in foreign exchange market. The optimism of oil market bulls up stock market in India while creating bearish trends in foreign exchange market. An assessment of impulse response graphs in pre-crisis, during crisis and post crisis period exhibits that the riposte of all the variables to a shock generating from within stays for a relatively longer period during crisis as compared to pre and post crisis period. These results have wider implications for market integration, policy makers and investors at large. Since these markets are integrated rather than segmented, from the perspective of investments, risk reduction cannot be achieved in the long run by holding assets from these markets in the same portfolio. However diversification opportunities are not ruled out in the short run. Stock market turns out to be the leader in all the three markets especially after the recent financial crisis. Rapidly rising stock prices in India signal the expectation of higher economic growth ahead. If the stock prices get trapped in a bubble, however, oil prices will overshoot in relation to economic fundamentals.
| Author | : Hamid Sakaki |
| Publisher | : |
| Total Pages | : 18 |
| Release | : 2018 |
| Genre | : |
| ISBN | : |
Using daily data of oil prices and exchange rates of 14 countries for the period January 1999 to November 2014, this study examines the dynamic correlation between oil prices and exchange rates using the DCC-GARCH model. The results show the significantly negative correlation between oil prices and exchange rates over the period. These results imply that the increase of oil price coincides with US dollar depreciation and vice versa. This correlation strengthens in a negative direction during periods of financial crisis while it shifts to an upward trend after the financial crisis period.
| Author | : Akash Malhotra |
| Publisher | : |
| Total Pages | : 8 |
| Release | : 2015 |
| Genre | : |
| ISBN | : |
Understanding the empirical linkage between oil prices and inflation is imperative as all monetary authorities attempt to keep inflation under check. This paper examines the time-varying correlations between crude oil prices and two major macroeconomic variables, inflation and interest rates in India. A dynamic conditional correlation GARCH analysis is applied to study the impact of oil price fluctuations on Indian Economy. Results of DCC-GARCH show that correlation between WPI (Wholesale price index) and international crude oil prices remains positive and close to one for majority of period except during the subprime mortgage crisis of 2007-09 when these two become negatively correlated. The results from DCC-GARCH suggests that global crude oil prices have significant effect on inflation but no direct effect on interest rates. However, results from Granger causality test indicates that oil prices will be able to affect interest rates at appropriate lag levels.
