Please use this identifier to cite or link to this item: https://gnanaganga.inflibnet.ac.in:8443/jspui/handle/123456789/13875
Title: A Var Approach to Estimate Financial Conditions Indexes for India
Authors: Ammar Hafeez
Sujata Kar
Keywords: Financial Conditions Index
Granger Causality Test
Impulse Responses
Vector Autoregressive Model.
Issue Date: 2017
Publisher: Journal of Management Entrepreneurship (JME)
Abstract: This paper attempts to construct monthly financial conditions indexes {FC/s) for India using VAR models. The FC/s are expected to reflect financial fragility or soundness of an economy. Two alternative indexes were calculated with data on variables from 6 different markets for a period of 2001:1 - 2016:1. FCI {WP/) was constructed with impulse responses generated through shocks to a real sector variable, WP/ inflation, while FCI {NEER) had responses from shocks to nominal effective exchange rate {NEER). The indexes were assessed in terms of their causal relationship with macroeconomic indicators like GDP and /IP growth rates, and directional predictions with respect to financial variables. Strong bi-directional causality was observed between the indexes and the macroeconomic indicators while good directional predictions were obtained against only SENSEX and NEER, and percentage changes in them. More specifically, FCI {WP/} recorded very good co-movements with respect to SENSEX.
URI: http://gnanaganga.inflibnet.ac.in:8080/jspui/handle/123456789/13875
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