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Impact of inflation and exchange rate on stock market returns in India: An ARDL approach

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  • H R TEJESH

    (Vijayanagara Sri Krishnadevaraya University, India)

Abstract

The study examines the impact of exchange rate and inflation on stock market (Nifty-50) returns in India using monthly data spanning from April 2013 to February 2024. The autoregressive distributed lag (ARDL) cointegration and error correction parameterization approach is applied to analyse this relationship. The findings reveal an insignificant long-run association between stock market returns and both inflation and the exchange rate. However, there is a significant short-run relationship between stock market returns and both inflation and the exchange rate.

Suggested Citation

  • H R Tejesh, 2024. "Impact of inflation and exchange rate on stock market returns in India: An ARDL approach," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(2(639), S), pages 25-36, Summer.
    • Handle: RePEc:agr:journl:v:xxxi:y:2024:i:2(639):p:25-36
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    References listed on IDEAS

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    1. Irum Mahmood & Fiyaz Nazir & Muhammad Junid & Zahoor Hussain Javed, 2014. "Stock Prices and Inflation: A Case Study of Pakistan," Journal of Asian Business Strategy, Asian Economic and Social Society, vol. 4(12), pages 217-223, December.
    2. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    3. Perron, Pierre, 1997. "Further evidence on breaking trend functions in macroeconomic variables," Journal of Econometrics, Elsevier, vol. 80(2), pages 355-385, October.
    4. Irum Mahmood & Fiyaz Nazir & Muhammad Junid & Zahoor Hussain Javed, 2014. "Stock Prices and Inflation: A Case Study of Pakistan," Journal of Asian Business Strategy, Asian Economic and Social Society, vol. 4(12), pages 217-223.
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