Journal Press India^®

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To answer the analytical contemplation, the study focused on the dynamic relationships between the GDP and Inflation on Stock Prices. This study is trying to analyze the presence of long-run, short-run, and causal relationships among the variables in the Indian context.  This study has used monthly data i.e., from 2005 to 2022 along with methods like Johansen Cointegration and VECM to verify short-run and long-run dynamic relationships, and the Granger Causality test to check the causal relationship between the variables. The result reveals the existence of long-run significant relationships among the variables while GDP has a positive influence on stock prices, however, Inflation has a negative relationship with stock prices. The study found unidirectional causality between Inflation to stock prices, and stock prices to GDP respectively while bidirectional causality between GDP and Inflation at a 10% level of significance during the study period.

Keywords

Macroeconomic Variables; GDP; Inflation; Stock Prices; Johansen Cointegration; VECM; Granger Causality

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