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Impact Of Inflation And Gdp On Stock Market Returns In India Pdf

impact of inflation and gdp on stock market returns in india pdf

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Inflation rate in India was 5. This represents a modest reduction from the previous annual figure of 9. Many developing countries use changes in the consumer price index CPI as their central measure of inflation. India uses changes in the CPI to measure its rate of inflation.

Journal of Globalization, Competitiveness and Governability

Inflation rate in India was 5. This represents a modest reduction from the previous annual figure of 9. Many developing countries use changes in the consumer price index CPI as their central measure of inflation. India uses changes in the CPI to measure its rate of inflation.

The WPI measures the price of a representative basket of wholesale goods. In India, this basket is composed of three groups: Primary Articles Food Articles from the Primary Articles Group account for The most important components of the Manufactured Products Group are, Food products This makes it more timely than the lagging and infrequent CPI statistic.

However, since it has been measured monthly instead of weekly. The challenges in developing economy are many, especially when in context of the monetary policy with the Central Bank , the inflation and price stability phenomenon.

There has been a universal argument these days when monetary policy is determined to be a key element in depicting and controlling inflation. The Central Bank works on the objective to control and have a stable price for commodities.

A good environment of price stability happens to create saving mobilisation and a sustained economic growth. Rangarajan points out that there is a long-term trade-off between output and inflation.

He adds on that short-term trade-off happens to only introduce uncertainty about the price level in future. There is an agreement that the central banks have aimed to introduce the target of price stability while an argument supports it for what that means in practice.

It arises as the basic theme in deciding an adequate monetary policy. There are two debatable proportions for an effective inflation , whether it should be in the range of 1—3 per cent as the inflation rate that persists in the industrialized economy or should it be in the range of 6—7 per cent. While deciding on the elaborate inflation rate certain problems occur regarding its measurement. The measurement bias has often calculated an inflation rate that is comparatively more than actual.

Secondly, there often arises a problem when the quality improvements in the product are in need to be captured out, hence it affects the price index. The consumer preference for a cheaper goods affects the consumption basket at costs, for the increased expenditure on the cheaper goods takes time for the increased weight and measuring inflation. The Boskin Commission has measured 1. The commission points out for the developed countries comprehensive study on inflation to be fairly low.

There is a puzzle formation between low-rate inflation and a high growth of money supply. When the current rate of inflation is low, a high worth of money supply warrants the tightening of liquidity and an increased interest rate for a moderate aggregate demand and the avoidance of any potential problems. Further, in case of a low output a tightened monetary policy would affect the production in a much more severe manner.

The supply shocks have known to play a dominant role in the regard of monetary policy. The bumper harvest in —99 with a buffer yield in wheat, sugarcane, and pulses had led to an early supply condition further driving their prices from what were they in the last year. The increased import competition since with the trade liberalisation in place have widely contributed to the reduced manufacturing competition with a cheaper agricultural raw materials and the fabric industry.

These cost-saving-driven technologies have often helped to drive a low inflation rate. The normal growth cycles accompanied with the international price pressures has several times being characterized by domestic uncertainties. Inflation in India generally occurs as a consequence of global traded commodities and the several efforts made by the Reserve Bank of India RBI to weaken rupee against the dollar.

This was done after the Pokhran Blasts in According to some experts the policy of RBI to absorb all dollars coming into the Indian economy contributes to the appreciation of the rupee. The RBI picture clearly portrays for subsidising exports with a weak dollar-exchange rate. All these account for a dangerous inflationary policies being followed by the central bank of the country.

There are several factors which help to determine the inflationary impact in the country and further help in making a comparative analysis of the policies for the same. The major determinant of the inflation in regard to the employment generation and growth is depicted by the Phillips curve. It basically occurs in a situation when the aggregate demand in the economy has exceeded the aggregate supply.

It could further be described as a situation where too much money chases just few goods. A country has a capacity of producing just 5, units of a commodity but the actual demand in the country is 7, units. Hence, as a result of which due to scarcity in supply the prices of the commodity rises. This has generally been seen in India in context with the agrarian society where due to droughts and floods or inadequate methods for the storage of grains leads to lesser or deteriorated output hence increasing the prices for the commodities as the demand remains the same.

The supply side inflation is a key ingredient for the rising inflation in India. The agricultural scarcity or the damage in transit creates a scarcity causing high inflationary pressures.

Similarly, the high cost of labor eventually increases the production cost and leads to a high price for the commodity. The energies issues regarding the cost of production often increases the value of the final output produced.

These supply driven factors have basically have a fiscal tool for regulation and moderation. Further, the global level impacts of price rise often impacts inflation from the supply side of the economy. Consensus on the prime reason for the sticky and stubbornly high Consumer Price Index , that is retail inflation of India, is due to supply side constraints; and still where interest rate remains the only tool with the Reserve Bank of India.

Developing economies like India have generally a lesser developed financial market which creates a weak bonding between the interest rates and the aggregate demand. This accounts for the real money gap that could be determined as the potential determinant for the price rise and inflation in India. There is a gap in India for both the output and the real money gap.

The supply of money grows rapidly while the supply of goods takes due time which causes increased inflation. Similarly, hoarding has been a problem of major concern in India where onion prices have shot high. There are several other stances for the gold and silver commodities and their price hike. The exchange rate determination is an important component for the inflationary pressures that arises in India. The liberal economic perspective in India affects the domestic markets.

As the prices in United States rises it impacts India where the commodities are now imported at a higher price impacting the price rise. Hence, the nominal exchange rate and the import inflation are a measures that depict the competitiveness and challenges for the economy. The inflation rate in India was recorded at 6. Historically, from until , the inflation rate in India averaged 7. The inflation rate for Primary Articles is currently at 9. This breaks down into a rate 7.

The inflation rate for Fuel and Power is at Finally, the inflation rate for Manufactured Articles is currently at 7. Given below is a comparison of average consumer price inflation, cost for filing tax returns inflation, gold, silver and house inflation indices in India collated from IMF, CBDT, RBI and multiple sources.

Price index is useful in gauging income and profit of sellers, cost index is useful in gauging expenditure and loss of buyers while the gold index helps measure wealth. The gold index is in vogue for three centuries. From Wikipedia, the free encyclopedia. The Hindu. Shailaja International Finance. Universities Press. Retrieved 9 September Indian Economy: Reviews And Commentaries -. East Asia Forum. The New York Times. Archived from the original on Retrieved Economy of India.

Category Commons Wikiquotes. Categories : Economy of India Inflation by country. Hidden categories: CS1: Julian—Gregorian uncertainty. Namespaces Article Talk. Views Read Edit View history. Help Learn to edit Community portal Recent changes Upload file. Download as PDF Printable version.

Inflation in India

Stock returns, macroeconomic variables and expectations: Evidence from Brazil. Rendimientos de las acciones, las variables de la macroeconomia y expectativas: Evidencia en Brasil. Lucio Linck luciolinck yahoo. Bachelor's Degree in Business Administration. Post graduation in Corporate Finance from Unisinos. Acting in area of financial management and controlling management. Roberto Frota Decourt roberto.

This study examined the stochastic properties of inflation rate, stock market returns and their cointegrating residuals using monthly data for the period to The Autoregressive Fractionally Integrated Moving Average ARFIMA -based exact maximum likelihood estimation was employed to determine the integration orders of the individual variables as well as the cointegrating residuals. Results from the ARFIMA model indicate that the month-on-month inflation rate, year-on-year inflation rate and stock market returns have non-integer orders of integration. The results also reveal that the cointegrating residuals have non-integer orders of integration, suggesting that deviations from the long run equilibrium are prolonged, contrary to the assumption held under the conventional cointegration framework. This supports Fisher Effect and implies that stock market returns in Kenya provide shelter against inflationary pressures.

A Study of the Effect of Inflation and Exchange Rate on Stock Market Returns in Ghana

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Skip to search form Skip to main content You are currently offline. Some features of the site may not work correctly. Reddy Published Economics. The market reacts differently to various factors ranging from economic political, and socio-cultural. The stock prices of quoted companies are affected either positively or negatively by a number of factors occurring within or without the economic system. Stock prices were represented by Stock Market Value Index in the model.

Yet, even as the pandemic drags on, the global economy has proven remarkably resilient. Following a steep decline in early , the world economy rode a rebound that began in May and remains on track to surpass prepandemic GDP levels by the end of this year—setting the stage for strong post-recovery growth in In their outlook, the economics team at Morgan Stanley Research says the V-shaped recovery that the team forecast in their midyear outlook is now entering a new self-sustaining phase and is on track to deliver 6. Three key factors will characterize the next stage of the V-shaped recovery, says Ahya: synchronized global growth, an emerging-market rebound and the return of inflation. World economies rarely move in lockstep. In fact, a synchronous global recovery, where growth in both developed and emerging markets accelerate in the same year, has happened only a dozen times over the past 40 years—the last in

The study examined the effect of exchange rate and inflation on stock market returns in Ghana using monthly inflation and exchange rate data obtained from the Bank of Ghana and monthly market returns computed from the GSE all-share index from January to December The autoregressive distributed lag ARDL cointegration technique and the error correction parametization of the ARDL model were used for examining this effect. The ARDL and its corresponding error correction model were used in establishing the long- and short-run relationship between the Ghana Stock Exchange GSE market returns, inflation, and exchange rate. The result of the study showed that there exists a significant long-run relationship between GSE market returns and inflation. However, no significant short-run relationship between them existed.

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