IMPACT OF EXCHANGE RATE AND TRADE OPENNESS ON STOCKS OF BSE SENSEX IN LONG RUN AND SHORT RUN : AN ARDL BOUNDS TESTING APPROACH

Abstract

The main objective of this study to find out the long and short run relationship between the two major macroeconomic variables i.e. Exchange rate and Trade openness and BSE SENSEX . The impact of macroeconomic variables plays a very important role in the development of stock market. For finding out the relationship the study supplies the Autoregressive Distributed Lag model for short run and Bounds test for long run relationship. Monthly time series data of eleven years from Jan 2009 to Dec 2019 has been taken for the study. For cross checking the short run relation the study applied the Wald test also. According to the results Exchange rate is affected the stock market in short run and both of the variables affected combinedly in long run.