IDEAS home Printed from https://ideas.repec.org/a/taf/intecj/v32y2018i1p66-90.html
   My bibliography  Save this article

Macroeconomic Response to Oil and Food Price Shocks: A Structural VAR Approach to the Indian Economy

Author

Listed:
  • Javed Ahmad Bhat
  • Aadil Ahmad ganaie
  • Naresh Kumar Sharma

Abstract

The study analyzed the dynamic impact of oil and food price shocks on the macroeconomy of India, using the monthly time series data from April 1994 to May 2016 in a structural vector autoregression (SVAR) framework. Being a net food exporter and net oil importer, the economy is found to face deleterious impacts of global oil and food price shocks on its macroeconomic performance. Output responds negatively to oil and food price hikes along with their volatility and positively to the fall in these prices. Inflation responds positively to all the three transformations of shocks with no signs of coming down, highlighting the price downward inflexibility in India. The study could not establish any evidence of negative demand shocks in face of oil and food price volatility. Central bank responds with a contractionary policy stance to negate the influences of external shocks. Forecast error variance decomposition points out the dominance of external shocks in influencing the domestic variables after their own shocks. Finally, the inflation downward rigidity is observed even in the long run.

Suggested Citation

  • Javed Ahmad Bhat & Aadil Ahmad ganaie & Naresh Kumar Sharma, 2018. "Macroeconomic Response to Oil and Food Price Shocks: A Structural VAR Approach to the Indian Economy," International Economic Journal, Taylor & Francis Journals, vol. 32(1), pages 66-90, January.
    • Handle: RePEc:taf:intecj:v:32:y:2018:i:1:p:66-90
    DOI: 10.1080/10168737.2018.1446038
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/10168737.2018.1446038
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/10168737.2018.1446038?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Abdhut Deheri & Stefy Carmel, 2024. "Do fluctuations in global crude oil prices have an asymmetric effect on oil product pricing in India?," Economic Change and Restructuring, Springer, vol. 57(1), pages 1-22, February.
    2. Guntur Anjana Raju & Shripad Ramchandra Marathe, 2020. "Relationship Between Crude Oil prices and Macro-economic Variables: Evidence from BRICS Countries," International Journal of Energy Economics and Policy, Econjournals, vol. 10(5), pages 264-271.
    3. Mohammad Asif & Vishal Sharma & Vinay Joshi Chandniwala & Parvez Alam Khan & Syed Mohd Muneeb, 2023. "Modelling the Dynamic Linkage Amidst Energy Prices and Twin Deficit in India: Empirical Investigation within Linear and Nonlinear Framework," Energies, MDPI, vol. 16(6), pages 1-23, March.
    4. Sajad Ahmad Bhat & Javed Ahmad Bhat, 2021. "Impact of Exchange Rate Changes on the Trade Balance of India: An Asymmetric Nonlinear Cointegration Approach," Foreign Trade Review, , vol. 56(1), pages 71-88, February.
    5. Cai, Yifei & Zhang, Dongna & Chang, Tsangyao & Lee, Chien-Chiang, 2022. "Macroeconomic outcomes of OPEC and non-OPEC oil supply shocks in the euro area," Energy Economics, Elsevier, vol. 109(C).
    6. Hong Thai Le & Marta Disegna, 2018. "Responses of macroeconomy and stock markets to structural oil price shocks: New evidence from Asian oil refinery," BAFES Working Papers BAFES25, Department of Accounting, Finance & Economic, Bournemouth University.
    7. Zahra Zarepour, 2022. "Short- and long-run macroeconomic impacts of the 2010 Iranian energy subsidy reform," SN Business & Economics, Springer, vol. 2(10), pages 1-32, October.
    8. Aijaz Ahmad Bhat & Javaid Iqbal Khan & Sajad Ahmad Bhat & Javed Ahmad Bhat, 2023. "Central Bank Independence and Inflation in India: The Role of Financial Development," Studies in Economics and Econometrics, Taylor & Francis Journals, vol. 47(4), pages 392-407, October.
    9. Deheri, Abdhut & Ramachandran, M., 2023. "Does Indian economy asymmetrically respond to oil price shocks?," The Journal of Economic Asymmetries, Elsevier, vol. 27(C).
    10. Muhammad Ali Rizwan & Muhammad Zeeshan Younas & Hafiza Sadaf Zahra & Zartaj Jamil, 2020. "External Monetary Constraints Imposed by Developed Economies on Developing Economies: Empirical Evidence from Pakistan," Asian Development Policy Review, Asian Economic and Social Society, vol. 8(1), pages 7-29, March.
    11. Gürkan Bozma & Murat Akadg & Rahman Aydin, 2021. "Dynamic Relationships between Oil Price, Inflation and Economic Growth: A VARMA, GARCH-in-mean, asymmetric BEKK Model for Turkey," Economics Bulletin, AccessEcon, vol. 41(3), pages 1266-1281.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:intecj:v:32:y:2018:i:1:p:66-90. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RIEJ20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.