Assessing the long-run and short-run effect of monetary variables on stock market in the presence of structural breaks: evidence from liberalized India
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引用次数: 1
Abstract
PurposeThe present study examines the long-run and short-run effects of monetary factors (money supply, interest rate, inflation and foreign currency exchange rate) on the Indian stock market.Design/methodology/approachThe study used sophisticated econometric tools to analyse monthly observations from January 1993 to December 2019.FindingsThe augmented Dickey–Fuller (ADF) test indicates that the variables involved in the present study are either I(0) or I(1). The Bai–Perron test multiple break point test identifies four breakpoint dates in the Indian stock market index series. The breakpoint dates are incorporated as different dummy variables in the autoregressive distributed lag-error correction model (ARDL-ECM) regression. The F-bounds test reveals that the variables in the study are cointegrated within the time period under consideration. This study’s findings show that the interest rate, which is a proxy for monetary policy instrument, and the foreign currency exchange rate have a negative impact on the Indian stock market. Furthermore, the authors find that structural changes significantly affect the performance of Indian stock market.Practical implicationsThe study's outcomes indicate that economic factors should be taken into account by investors and portfolio managers when formulating long-term investment strategies. The government, through the Reserve Bank of India, should exercise caution in avoiding discretionary actions that could increase interest rates since the flow of funds to the stock market will be disrupted. To reduce risk, investors should keep a close eye on how interest rates and foreign exchange rates are rising.Originality/valueThe study covers a long period of time, which the majority of previous work did not consider. Furthermore, the study uses different dummy variables in the ARDL model to represent structural breaks (as determined by the Bai–Perron multiple break point test).
本研究考察了货币因素(货币供应量、利率、通货膨胀和外币汇率)对印度股市的长期和短期影响。该研究使用复杂的计量经济学工具分析了1993年1月至2019年12月的月度观测结果。扩充的Dickey-Fuller (ADF)检验表明,本研究涉及的变量要么是I(0),要么是I(1)。Bai-Perron测试多重断点测试确定了印度股市指数系列中的四个断点日期。断点日期作为不同的虚拟变量纳入自回归分布滞后误差校正模型(ARDL-ECM)回归。f界检验表明,研究中的变量在考虑的时间段内是协整的。本研究的研究结果表明,作为货币政策工具的代理利率和外汇汇率对印度股市产生了负面影响。此外,作者发现结构性变化显著影响印度股票市场的表现。实际意义研究结果表明,投资者和投资组合管理者在制定长期投资策略时应考虑经济因素。印度政府应通过印度储备银行(Reserve Bank of India)谨慎行事,避免可能提高利率的自由裁量行动,因为流向股市的资金将受到干扰。为了降低风险,投资者应该密切关注利率和汇率的上升趋势。独创性/价值这项研究涵盖了很长的一段时间,这是大多数以前的工作没有考虑到的。此外,研究在ARDL模型中使用不同的虚拟变量来表示结构断裂(由Bai-Perron多重断点检验确定)。