Select Macroeconomic Variables Research Articles

Modeling Long Memory Volatilities of Nigeria Selected Macro Economic Variables with Arfima and Arfima Figarch

The research delved into analysing the stochastic characteristics of Nigeria's Real GDP, the exchange rate of the Naira to US Dollar, and the inflation rate employing Autoregressive fractionally integrated moving average (ARFIMA) and the Autoregressive Fractionally Integrated Moving Average Fractionally Integrated Generalized Autoregressive Conditional Heteroskedasticity (FIGARCH) modelling approach. The ability of the hybrid formation of ARFIMA-FIGARCH model with Nigeria macroeconomic variables in modeling the periodicity of long memory volatilities was examined. ARIMA GARCH method of modeling was also employed in analyzing the volatilities of Nigeria selected macroeconomic variables to enrich the study. The efficiency of ARFIMA, ARFIMA FIGARCH and ARIMA GARCH models were evaluated with the forecast evaluation measurements. Results revealed that ARFIMA FIGARCH and ARIMA GARCH models are more adequate in modeling the Inflation rate and the exchange rate while ARFIMA present more adequacies in modeling the RGDP. This result revealed evidence of high volatilities in Nigeria Inflation and the exchange rate of Naira to US dollar

Autoregressive Distributed Lag Approach for Estimating the Nexus between Net Asset Value of Mutual Fund and Economic Determinants in India

India has seen a phenomenal growth in cumulative mutual fund investment from Rs 7.93 trillion in 2012 to Rs 40.38 trillion in 2022, which is more than a five-fold increase since last 10 years. Retail investors are now realizing the power of savings and Systematic Investment Plans (SIP) to build long term wealth. A financial literacy wave which is sweeping across India has projected mutual funds as a significant contributor and beneficiary of this phenomenon. The evolving economic landscape of India provides investors with excellent opportunities to capitalize on these fluctuations through systematic investment in safe investment vehicles like mutual funds. The market associated with mutual funds is always subjected to economic risks. The erratic fluctuations in macroeconomic variables can largely explain the Volatility in Net Asset Value (NAV) of equity oriented mutual fund schemes. With this background, this paper examines the impact of select macroeconomic variables on mutual funds’ performance in India. To analyse this, monthly observations of select macroeconomic variables, average NAV of large cap, mid cap, and small cap funds collected for a period of 10 years starting from January 2013 to November 2022. Descriptive statistics is used to probe the characteristics of the variable. In addition, correlation and ordinary least square method is applied to check the existing relationship and impact level of macroeconomic factors on NAV of select schemes. Lastly, short and long run relationship is analysed using Autoregressive Distributed Lag Model (ARDL).

Understanding the Relationship Between Foreign Direct Investment and Economic Growth in BRICS: Panel ARDL Approach

Foreign direct investment (FDI) has gained prominence in international economics over the past three decades. Primarily, the belief that FDI influences economic growth of the host country, set the stage for the empirical research focused on the FDI–growth nexus. The growth literature, however, reveals mixed evidence regarding the role of FDI in promoting growth. Despite the conflicting evidence, developed and developing economies have attached immense economic and political importance to FDI. It is noteworthy that BRICS (Brazil, Russia, India, China and South Africa) economies are representative developing economies and have emerged as significant FDI destinations, having witnessed an immense surge in inward FDI over the past few decades. It is against this backdrop that the present study attempts to assess the impact of FDI inflows and select macroeconomic variables, namely macroeconomic stability, human capital, financial development and trade openness (TO), on the economic growth of developing BRICS economies. The study examines both short-run and long-run relationships between FDI inflows, select macroeconomic variables and economic growth by employing the dynamic panel autoregressive distributed lag (ARDL) model, unlike most of the previous studies. For this study, secondary data covering a reference period of 32 years (1987–2018) were used. The data on GDP growth (GDPG), FDI inflows, inflation (INF), human capital, private sector bank credit (proxy for financial development) and TO have been collected from the World Investment Reports published annually by United Nations Conference on Trade and Development (UNCTAD) and World Bank (World Development Indicators). The findings revealed a long-run cointegration among FDI, host country characteristics (TO, human capital, financial development and macroeconomic stability) and economic growth in BRICS.

Modelling the role of fiscal and monetary policy instruments on carbon emission in non‐linear framework: A case of emerging economy

AbstractIndia is the second most populous country in the world and stood at seventh rank in a major climate risk index in 2019, which is a grave concern for the Indian government, policymakers and environmentalists. Therefore, the present study examines the role of fiscal policy and monetary policy instruments along with select macroeconomic variables on carbon emission in India over the period 1971–2019 in the non‐linear framework. The outcome of the study reveals that the impact of fiscal and monetary policy instruments on carbon emission is asymmetric in nature. In addition, the positive and negative shocks in fiscal and monetary policy instruments have a positive and negative impact on carbon emissions, respectively. Based on the coefficients’ magnitude, the role of fiscal policy instruments has a more prominent effect on carbon emissions than monetary policy instruments. The findings of the study imply that the Indian government is required to implement green fiscal and monetary policies. Use fiscal policy to implement a ‘green tax ratio’ and a ‘green subsidy programme’ for manufacturers and investors to reduce CO2 emissions. A ‘green lending programme’ should be introduced for commercial banks by implementing monetary policy via the central bank.

Impact of Fintech Adoption on Select Macroeconomic Variables in India: An ARDL Approach

Fintech adoption (technology-enabled finance) has not only supplemented the existing physical financial setups for India but has also stretched its wings towards providing the financial services to those who had limited or no access to physical banking (and other financial institutions). Moreover, COVID-19-based restrictions have further strengthened the Fintech adoption among suppliers, regulators and consumers of financial services which in turn has benefited the economy at large. The present study is an attempt to empirically evaluate the impact of Fintech adoption on India’s select macro-economic variables. The macro-economic variables, namely economic growth; income per individual; official exchange rate as a proxy of financial stability vis-à-vis world at large; and labour participation were examined. An index was formed via principal component analysis to capture Fintech adoption over the period 2001–2020 and ARDL framework was employed to examine the results. The results indicate that Fintech adoption has supported India’s economic growth, income per capita and also official exchange rate. Intense regulatory measures towards technical-efficient financial structures might have contributed towards such results. However, the results indicate that the growth in digital financial medium is leading to a reduction in jobs in India.

Do select macroeconomic factors drive momentum returns?

In this paper, we examine the presence of short-term and long-term momentum returns in Indian stock market. The study also tries to shed light on the power of asset pricing models and select macroeconomic variables in explaining momentum returns. The results confirm the presence of short-term and long-term momentum returns in Indian stock market. It is also found that Carhart four-factor model’s performance is relatively superior to other factor models such as one factor capital asset pricing model and Fama–French three-factor model in terms of capturing momentum returns. Finally, macroeconomic variables which are considered for analysis do not have any power to explain momentum returns.

Macroeconomic variables and stock market performance: a PMG/ARDL approach for BRICS economies

ABSTRACT The present study seeks to examine the impact of select macroeconomic variables on stock market performance in the BRICS economies. The study has used monthly data over the period 2011–2021. The study has employed both ARDL bounds testing model and PMG/ARDL model to measure the short and long-run relationships. Both the models provide the confirmatory results regarding short as well as long-run relationships for all the BRICS economies excluding South Africa. Also, the variables have been found to be causally related with each other during the sample period. The study has implications for policymakers, regulators, academia and investors.

Influence of Select Macro-economic Factors on Investments in Indian Mutual Funds Market

The Indian financial market is growing fast by channelizing house hold savings through various investment avenues, among which mutual funds become more popular in recent times. The growth of the mutual fund market depends on the investment environment of the country. There are several macroeconomic factors influences the investment environment, which in turn helpful for assessing the market risk and investment desirability. The present paper aim to study the influence of select macro-economic factors on investment in Indian mutual funds market. The data pertaining to the select macroeconomic variables gathered from secondary sources for a period of 28 years (1990-91 to 2017- 18). The causal relationship between select macro-economic variables and their influence on the Mutual funds market has been analyzed by using descriptive statistics with suitable test statistics, correlation matrix, Augmented Dickey-Fuller (ADF) test, and Granger causality test. The study results conclude that the select macroeconomic variables do not have any significant influence on investments in Indian Mutual funds market for valid market predictions and worthwhile investment decisions. Keywords : Macroeconomic variables, S & P CNX Nifty, correlation matrix, Augmented Dickey-Fuller (ADF), Granger causality. DOI: 10.7176/RJFA/12-11-01 Publication date: June 30 th 2021

The dynamics of macroeconomic variables in Indian stock market: a Bai–Perron approach

ABSTRACTThe stock market is dynamic, so also the economic conditions. Structural breaks are unexpected shifts which occur in a time-series data which may deteriorate the results. The study deals this situation using the Bai–Perron test and examines the impact of select macroeconomic variables on stock market returns and thereafter investigates the causal relations. The study evidenced a significant impact of macroeconomic variables on stock market returns, and such impact was found to be varying across structural periods. The results are aimed to contribute significantly to finance literature and assist market participants and research analysts in evaluating Indian stock market.

A Comparative Analysis of Adjustment of Nigerian Selected Macro Economic Variables to Deregulated Exchange Rate System

This study is a comparative analysis of how Nigerian macro economic variables of Balance of Payment and Real Sector performance (surrogated by Real Gross Domestic Product) reacted to exchange rate deregulation in Nigeria. One of the reasons why countries deregulate their exchange rate is to avail themselves the benefits of international trade, and the international trade transaction of every nation is depicted in its balance of payment position. In order to ascertain the significance of Naira deregulated exchange rate on the selected variables, a pre and post deregulation analyses were carried out using Paired Sample T Test staring from 1960 to 1985 as pre deregulation period and 1986 to 2011 as post deregulation period. The result revealed that both Balance of Payment and Real Sector Performance reacted significantly to exchange rate deregulation. While the influence of deregulation of exchange rate on Balance of Payment was negative, it showed a positive influence on Real Sector performance. The researchers concluded that deregulation of exchange rate did not increase the Nigerian general export, but oil export only, which is also an indication that Nigerian domestic industries did not contribute significantly to the country’s export level. We recommend that the monetary authority can consider placing a crawling peg on Naira exchange rate level in order to regulate the level of currency depreciation; this will reduce the cost of production for the domestic industries as most of their raw materials are imported. Again the export ability of the Nigerian domestic industries can be enhanced by granting them export incentives such as free international packaging and external credit guarantee.

A Study of Impact of Selected Macro Economic Variables on Nifty

A Study of Impact of Selected Macro Economic Variables on Nifty

Can Select Macroeconomic Variables Explain Long - Run Price Movements of Indian Stock Indices ?

This study was an attempt to find the cointegration and causality among select macroeconomic variables namely foreign direct investment (FDI), exports, and imports and select stock indices of India like Nifty 50, Nifty FMCG, and Nifty Pharma over the period from January 2001 - December 2015. Nifty 50 and sectoral stock indices were considered as dependent variables, and select macroeconomic variables were considered as independent variables. In this study, appropriate econometric tools such as Augmented Dickey-Fuller (ADF) unit root test, Phillips - Perron (PP) unit root test, Karl Pearson's correlation coefficient, Johansen's cointegration test, vector error correction model (VECM), Granger causality test, variance decomposition index, and impulse response function were applied to analyse the linkages between select time series data. From the analysis, it was found that all the study variables were cointegrated and it was determined that select macroeconomic variables had the ability to correct the disequilibrium in the price movements of select stock indices. Granger causality test resulted in unidirectional causality between the study variables. Furthermore, it was found that sectoral stock indices responded and fluctuated with shocks to FDI, exports, and imports at a certain level of variation.

Regime-switching monetary and fiscal policy rules and their interaction: an Indian case study

The recession following the sub-prime crisis has rekindled international interest in the field of monetary and fiscal policy interaction. However, very little has been done to appropriately estimate these dynamic policies. This paper estimates regime- switching monetary and fiscal policy rules and lays strong emphasis on mis-specification testing. We apply a Markov regime-switching model to estimate monetary and fiscal policy rules for India to highlight the evolving stance of Indian macro-policy for the period 1951–2008 and investigate the behaviour of select macroeconomic variables under the estimated policy regimes. Our results suggest that, in India, fiscal policy was largely active for the entire period except for a few periods of restraint. Monetary policy, despite achieving greater autonomy post-1990s, has largely been accommodating fiscal policy. Whenever monetary policy became active, fiscal policy undermined monetary policy’s effectiveness by not accommodating accordingly. We argue for an aggressive monetary policy and a constrained fiscal policy in India.

Monetary versus fiscal policy in India: an SVAR analysis

ABSTRACTConventionally, the policymakers relied on three policy alternatives to manage business cycles – debt-financed government spending, debt-financed tax rebate and interest rate. While the first two are fiscal policy instruments, the latter is a monetary policy instrument. This paper aims to capture interactions among Indian monetary and fiscal policy actions, and the impact of such policy actions on select macroeconomic variables for the period 1990Q1–2011Q4. The policy actions are identified using the sign restrictions approach combined with magnitude restrictions in a Structural Vector Autoregression framework, and interpreted using impulse responses and variance decomposition. The results show that Indian monetary policy responds to tax rebate shocks and spending shocks differently. In the case of a tax rebate shock, Indian monetary policy responds by reducing interest rates thereby accommodating fiscal expansion. On the opposite, monetary policy seems not to accommodate expenditure shocks. Interestingly, the monetary policy shock is accompanied by a fiscal expansion that threatens the credibility of the central bank actions, thus indicating fiscal policy dominance. A comparison of the efficacy of the policies suggests that the interest rate is more effective in stimulating output. Out of the two fiscal policy instruments analysed, the tax rebate seems to be the better option for stimulating output considering the output-debt trade-off.

Exchange Rate Volatility in Pakistan and Its Impact on Selected Macro Economic Variables (1980-2014)

Among the developing countries, Pakistan experienced a unique downward trend in rupee value and frequent transitions in the exchange rate systems. These distinctive features make Pakistan economy an interesting case study for the empirical examination of the rupee exchange rate and its role in the monetary policy and macroeconomic performance. The purpose of the present study is to find out which of the macroeconomic indicators has led the Pak-rupee exchange rate volatility during the study period. Furthermore, the effect of the exchange rate volatility on foreign exchange reserves and selected macroeconomic variables has also been studied in the framework of a regression approach. Time series annual data covering the period of 1980 to 2014 has been used for the empirical analysis. Augmented Dickey Fuller test has been used for checking the unit root in the data. Ordinary Least Squares method is used for the estimation of regression equations. For avoiding the problems of spurious relationship between the variables and series implications for the standard errors, various diagnostic tests have been applied. Initially study has taken exchange rate as dependent variable and some selected macroeconomic variables as independent variables. The result show that exchange rate has negative relationship with the variables such as inflation (INF), foreign direct investment (FDI), imports (IMP) and positive with GDP per capita (PCGDP) and exports (X), which is also supported by the theory and results. As there is two-way relationship between exchange rate and several macroeconomic variables, some selected macroeconomic variables are taken as dependent variables and exchange rate as independent variable. The results show that exchange rate volatility has negative impact on foreign exchange reserves (FOREX), and imports (IMP) and positive on GDP per capita (PCGDP) and exports (X). On the basis of the findings, it has been recommended that foreign factors in addition to the domestic factors should also be taken into account for the stability of exchange rate. Moreover, instead of targeting the monetary aggregates, the State Bank of Pakistan should follow a rule based monetary policy where exchange rate fluctuations should also be taken into account. Moreover, instead of devaluations of rupee for increasing exports, the government is required to follow import substitution policies. Furthermore, to increase the inflow of foreign exchange reserves in the country, the development of export sector of the country can play an important role.

Analysis of the impact of select macroeconomic variables on the Indian Stock Market: A heteroscedastic cointegration approach

The present study examines the impact of the macroeconomic variables on the stock prices in India. To fulfil the objective of the study monthly data of inflation, short-term interest rate, long-term interest rate, index of industrial production, exchange rate, money supply, and the stock indices of CNX Nifty and BSE SENSEX were collected from March 2005 to April 2013. Heteroscedastic cointegration approach was employed using a Johansen test of cointegration, OLS and GARCH (1, 1) model to find out the long-term relationship between the selected macroeconomic variables and the stock prices. It is evident from the study that there exist the long-term heteroscedastic relationships between the stock prices and the macroeconomic variables chosen for the study. Further, it is also evident from the study that while INF, MSE and the IIP are positively related to the stock prices, the SIR, LIR and the EXR are negatively related to the stock prices.

Lending Sociodynamics and Drivers of the Financial Business Cycle

We extend sociodynamic modeling of the financial business cycle to the Euro Area andJapan. Using an opinion-formation model and machine learning techniques we find stable modelestimation of the financial business cycle using central bank lending surveys and a few selectedmacroeconomic variables. We find that banks have asymmetric response to good and bad economicinformation, and that banks adapt to their peers’ opinions when changing lending policies.

FDI in the Retail Sector and its Impact on Select Macro-Economic Variables:A Comparative Study of India and China

Retailing can be defined as the buying and selling of goods and services. It can also be defined as the timely delivery of goods and services demanded by consumers at prices that are competitive, affordable, and available under one roof. The current research work aspired to analyze the FDI in retail sector and its impact on the select macro-economic variables of both India and China. The study made a comparative analysis with respect to both the countries. The study observed that FDI plays a vital role in transforming developing countries into developed nations. The overall performance of select macro-economic variables in India, when compared to China, need to improve. New privileges in FDI will stabilize the market and the financial indicators in the future.

Impact of Selected Macro Economic Variables on Foreign Direct Investment in Kenya

Foreign direct investment is one of the major sources of external finance for developing countries like Kenya that have a limited amount of capital. Foreign flows into the country so far have been increasing as compared to the previous year’s revealing Kenya potential as a business hub for multinational companies to invest in. However, the inability to retain FDI flows into the country has become a major problem and understanding the factors driving FDI inflows into a country and their impact on a country’s economic development is of importance. The main objective was to find out the impact of exchange rate, GDP and inflation on FDI in Kenya. Foreign direct investment as a percentage of GDP was the dependent variable while the independent variables were exchange rate, GDP and Inflation rate. The study examined data for 10 years from 2005-2014 for Kenya. To find out the perception of people towards FDI in Kenya primary data was collected from a sample of 271 people. A linear regression analysis was used to determine the relationship between exchange rate, GDP, inflation rate and FDI inflows. Exchange rate, GDP and Inflation rate were found to have a negative insignificant effect on FDI inflows. The study also found out that people in Kenya perceive FDIs as market seeking investments that is they will invest if there is availability of market for the goods and services produced. The study recommends that Policies in relation to formation of regional treaties between Kenya and neighboring countries with an aim of encouraging foreign investment should be made. Security should also be maintained within and around the country and political stability is also crucial in attracting and retaining FDIs. In addition the government should increase its fight against corruption in Kenya so as to increase the foreign investor’s confidence in investing in our country.

Long-run and Short-run Relationship between Macroeconomic Factors and Returns on Sectoral Indices in Saudi Arabia: An Empirical Analysis

The study analyses the relationship between the select macroeconomic variables, inflation, industrial production, money supply, exchange rate, oil prices and global stock prices on the returns of the 15 sectors listed on Saudi stock market. The study applies cointegration technique and finds that there exists at least one cointegration vector between the chosen macroeconomic variables and the sector indices. Error correction model and Wald test to check the long-run and short-run causality relationship between the macroeconomic variables and sectoral stock indices. Results show that the effect of the macroeconomic variables on the returns of the various sectors is varied. The speed of adjustment of the system in case of short run deviations from the long run equilibrium is also found to be different for the various sectors. This study offers important inputs for investment decision making for the investors in the specific sectors of the Saudi stock market. DOI: 10.5901/mjss.2015.v6n2p333