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Osmania Journal of International Business Studies
Year : 2009, Volume : 4, Issue : 2
First page : ( 101) Last page : ( 114)
Print ISSN : 0973-5372.

Rupee/Dollar exchange rate variations in India: a var approach

Maitra Biswajit, Mukhopadhyay C.K., Professor of Economics

Department of Economics, University of North Bengal, India

Abstract

This study is devoted to enquire if ttie Rupee/Dollar exchange rate variation has any link to the variation of domestic money supply. It is found that money supply and exchange rate are Cl(1,1) cointegrated. The VEC model has found the evidence that the long-run relationship between money supply and exchange rate was stable. The short-run dynamics of exchange rate is an equilibrium process. The VAR model has established the unidirectional Granger causality running from money supply to exchange rate over the period of the study. The Impulse Response Functions indicate that both the monetary and exchange rate shocks were short-lived and failed to bring forth significant changes in exchange rate profile.

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