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Decomposing Time-Frequency Relationship between Interest Rates and Share Prices in India through Wavelets - La scomposizione della relazione di frequenza temporale tra tassi di interesse e prezzi azionari in India tramite wavelet

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The study analyses Granger-causality between interest rate (IR) and share prices (SP) for India by using monthly data covering the period of 1990M1 to 2009M3. The time-frequency relationship between IR and SP was decomposed through continuous wavelet approach for the first time in the study. We found that for the Indian economy the causal and reverse causal relations between SP and IR vary across scale and period viz., during the late 1993 and early 1994, in 1-4 months scale, SP is lagging with cycle effects from IR, whereas during 1998-2001, in 8~12 months scale, SP is leading with cyclical effects on the IR. Further, results show that during 2003 to early 2005 (in 1~6 months scale) and again after late 2006 (in 9~14 months scale) SP is lagging and receiving anti-cyclical effects from IR. - Questo studio analizza la relazione di Granger-causalità tra il tasso di interesse e le quotazioni azionarie in India utilizzando dati mensili relativi al periodo gennaio 1990-marzo 2009. La relazione di frequenza temporale tra il tasso di interesse e le quotazioni azionarie è stata scomposta tramite l’approccio wavelet continuo utilizzato per la prima volta in questo studio. I risultati evidenziano che nell’economia indiana la relazione causale inversa tra tasso di interesse e quotazioni azionarie varia in scala e periodo: durante la fine del 1993 e l’inizio del 1994, in scala 1-4 mesi, le quotazioni azionarie crescono in misura minore del tasso di interesse con effetti ciclici, mentre durante il periodo 1998-2001, in scala 8-12 mesi, esse crescono in misura maggiore e con effetti ciclici. Inoltre vi sono evidenze che durante il 2003 fino all’inizio del 2005 (in scala 1-6 mesi) e nuovamente dopo gli ultimi mesi del 2006 (in scala 9-14 mesi) le quotazioni azionarie rallentano e ricevono effetti anticiclici dal tasso di interesse.

Suggested Citation

  • Tiwari, Aviral Kumar, 2013. "Decomposing Time-Frequency Relationship between Interest Rates and Share Prices in India through Wavelets - La scomposizione della relazione di frequenza temporale tra tassi di interesse e prezzi azio," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 66(4), pages 515-531.
  • Handle: RePEc:ris:ecoint:0702
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    More about this item

    Keywords

    Interest Rates; Share Prices; Time-Frequency Analysis; Wavelets; Cross Wavelets; Wavelet Coherency;

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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