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Commodity Prices and Macroeconomic Variables in India: An Auto-Regressive Distributed Lag (ARDL) Approach

Jena, Pratap Kumar (2015): Commodity Prices and Macroeconomic Variables in India: An Auto-Regressive Distributed Lag (ARDL) Approach.

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Abstract

This paper examines the relationship between commodities index prices and macroeconomic variables in India over the period of January 2001 to June 2012 using the time series techniques of ARDL model and ECM model. The ARDL test suggests that there is longrun cointegration between agriculture index price and macroeconomic variables, and also between energy index price and macroeconomic variables. But, there is no long-run cointegration between metal index price and macroeconomic variables. The results also indicate that IIP and Exchange rate have positive and significant effects on the agricultural index price. This implies that that IIP and Exchange rate are vital macroeconomic variables that influence the agricultural index price in the study period. Similarly, the aggregate demand (i.e. IIP) is the positive and significant effect on energy index price. This implies that that IIP is a vital macroeconomic variable that influences the energy index price in the study period. But, there is no such macroeconomic variable we found which have a significant effect on the metal index price.

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