Asian Journal of Development Matters
Year : 2017, Volume : 11, Issue : 2
First page : ( 46) Last page : ( 55)
Print ISSN : 0973-9629. Online ISSN : 0976-4674.

A Causality Study on the Volatility of Macroeconomic Fundamentals and Real Exchange Rate Volatility in India

Dr. Thimmaiah Navitha¹,  Rashmi²

¹Assistant Professor, DOS in Economics and Cooperation, University of Mysore, Karnataka

²Rashmi, Research Scholar, DOS in Economics and Cooperation, University of Mysor

Online published on 23 March, 2018.

Abstract

This paper attempts to study the causality between the volatility of macroeconomic fundamentals on the volatility of real exchange rate of the Indian rupee for the period 1996–97 to 2015–16. The conditional variances of the variables are used as proxies for the measurement of volatility. Granger Causality Test is used to analyse the causal relationship between the variables. The results of the analysis indicate the presence of causality between macroeconomic fundamentals and real exchange rate behaviour. Further, the results of the causality test on the volatility variables establish the existence of causal relationship between not only the macroeconomic fundamentals and real exchange rate, but also between their volatilities.

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