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Demonetization and Its Effects on BSE SENSEX and Some Sectoral Indices: An Exploratory Econometric Analysis

Author

Listed:
  • Debabrata Mukhopadhyay

    (U West Bengal State University, Barasat, North 24 Parganas, Kolkata 700 126, India.)

  • Nityananda Sarkar

    (Indian Statistical Institute, 203 B.T. Road, Kolkata 700 108, India.)

Abstract

This study has carried out some preliminary time series analyses to examine the impacts of demonetization which was carried out in India on 8 November 2016, on the well-known Indian stock index, BSE SENSEX, and four major sectoral indices viz., BSE BANKEX, BSE Auto, BSE Reality and BSE Smallcap, using daily level time series data covering the period 1 January 2016 to 31 May 2017. Apart from examining the stationarity/ nonstationarity property and existence of structural breaks after demonetization in these series, the paper has also studied the trend behavior and returns models for both the pre- and post-demonetization periods. This study has found that while there is more than one break in all the five series at their level values, there is only one structural break after demonetization. It has been found that the trend function for all the index series broadly gives support to this finding of one break after demonetization. Further, some changes have been observed in the stationary models for the two sub-periods of pre- and postdemonetization for all but BSE Auto index. Finally, except for BSE SENSEX, no change in the status of stationarity/nonstationarity in the pre- and post- demonetization periods has been found in the other series.

Suggested Citation

  • Debabrata Mukhopadhyay & Nityananda Sarkar, 2019. "Demonetization and Its Effects on BSE SENSEX and Some Sectoral Indices: An Exploratory Econometric Analysis," International Econometric Review (IER), Econometric Research Association, vol. 11(2), pages 38-57, September.
    • Handle: RePEc:erh:journl:v:11:y:2019:i:2:p:38-57
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    References listed on IDEAS

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    More about this item

    Keywords

    Bai-Perron Multiple Break Points Test; Demonetization; Stationarity; Structural Breaks; Sup MZ Test.;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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