Title: The global financial crisis and variability in the stock price index in India: a vector error correction model approach

Authors: Jagriti Srivastava; Sandeep Yadav

Addresses: Finance, Accounting, and Control Area, Indian Institute of Management Amritsar, Punjab, India ' Strategy Area, Indian Institute of Management Bangalore, Bengaluru, India

Abstract: We study the cointegration and causality between the various macroeconomic variables, global financial crisis (GFC) and the Indian economy [National Stock Exchange (NSE)] stock price index (SPI) from 1995-2018. We analyse how the macroeconomic variables: exchange rate (EX), gross domestic product (GDP), consumer price index (CPI), and money supply (M2) and SPI are related using a vector error correction model (VECM). The results suggest a long-run cointegrating relationship between the above-mentioned macroeconomic variables and SPI. We also find that bidirectional causality exists between GDP and SPI in India. The results also show that SPI and GFC have a significant negative relationship.

Keywords: stock price index; SPI; exchange rate; gross domestic product; GDP; consumer price index; CPI; money supply; cointegration; causality; global financial crisis; GFC.

DOI: 10.1504/IJICBM.2023.130933

International Journal of Indian Culture and Business Management, 2023 Vol.29 No.1, pp.81 - 95

Received: 06 Jan 2022
Accepted: 07 Jan 2022

Published online: 14 May 2023 *

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