Crude Oil Prices and Exchange Rate in India: Evidence from Toda and Yamamoto approach
Crude Oil Prices and Exchange Rate in India: Evidence from Toda and Yamamoto approach

Summary/Abstract: India is one of the fastest growing economies with a tremendous increase in the import of its oil resources. It imports around 80% of its oil resources which constitutes a thirdof the total import of the country. The unfavourable movement of oil price creates issues like inflation, economic instability and slumped growth in the economy. The objective of this paper is to analyse the dynamic relationship between oil price fluctuation and rupee dollar exchange rate by using daily time series data from 16th February, 2015 to 1st February 2018.To investigate the causal relationship, the study employed innovative and advanced version of Granger non-causality test proposed by Toda and Yamamoto (1995). The results of Granger non-causality test indicate that there is a unidirectional causality running from oil price to exchange rate, not vice versa. This result is substantiated by the movement of rupee exchange rate during the period of study.

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