AN EMPIRICAL STUDY ON IMPACT OF GOLD PRICE ON EXCHANGE RATE IN INDIA

Abstract

Macroeconomic variables play a vital role in the economic performance of any country. They act as the barometer for measuring the success of any economy. The macroeconomic variables are interlinked with each other and in many instances influence each other’s performance. Hence it is of utmost importance to study the interrelationship among them, to construct a concept about contribution of each variable and as well as it’s impact on other variables in the economic development. The present study focuses on the interrelationship between two macroeconomic variables – Gold price in India & Exchange rate (USD/INR). Karl Pearson’s Correlation Coefficient is used to study the extent to which the movement of the two variables is associated. A linear regression model with Exchange rate as dependent variable & Gold price as independent variable is fitted. Further ANOVA analysis is done to evaluate the acceptability of the model from statistical perspective. The study concludes that the selected macroeconomic variables are strongly associated with each other & a tenable regression model is developed with a very high degree of Coefficient of determination. Further the validity of the developed model is also justified by the p value from ANOVA table. KEYWORDS: Karl Pearson’s Correlation Coefficient, Linear regression model, ANOVA