43rd international conference of International Multidisciplinary Research Foundation was held at Lar de sta Terezinha,Margao,Goa during 3-5 November,2016.I have presented my paper on "Rupee US dollar nominal exchange rate of India:Behaviour,cointegration and vector autoregression".The paper was published in the journal titled Business Sciences International Research Journal (page1-19).
The paper studied the nominal exchsnge rate behaviour of rupee us dollar during 1970-2015,with the help of semilog or exponential model,variance ratio test,Baiperron test,H.P.Filter model,AR,ARIMA and GARCH models respectively.Johansen cointegration test and VECM were used to relate exchange rate with its determinants showing the process of error correction .The paper concludes that nominal rupee exchange rate has been depreciating with respect to usdollar at the rate of 5.57% per year or exponentially at the rate of 0 365% per year during 1970-2015.The nominal exchange rate does not follow random walk and random walk with drift.It has three structural breaks at 1984,1991,1998 respectively.It showed non linear trend after minimising cyclical behaviour.Its AR(2),process is stable and convergent and ARIMA(1,1,1) showed stationary and stable but its ARIMA(2,1,2) is nonstationary.The exchange rate series contain high volatility as shown by GARCH(1,1) model.Nominal exchange rate is positively significantly related with current account deficit,fiscal deficit,external debt and whole sale price index and negatively significantly related with interest rate and trade openness respectively.Johansen cointegration test assured that trace statistic has 6 cointegrating vectors and MaxEigen statistic has 3 cointegrating vectors.Thus VECM is stable but divergent with speedy significant error correction of change in current account and fiscal deficit and change in interest rate respectively.
Target rate of inflation,reducing fiscal deficit,debt and slow full convertibility may improve the exchange rate scenario.
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