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On the Relationship Between Macroeconomic Factors and S&P BSE Auto Index: An ARDL Approach

In: Eurasian Business and Economics Perspectives

Author

Listed:
  • Rhoda Alexander

    (Birla Institute of Technology Offshore Campus
    Stirling Management School, University of Stirling)

  • Husam-Aldin N. Al-Malkawi

    (British University in Dubai)

Abstract

This study aims to explore the relationship between selected macroeconomic variables and the S&P BSE Auto index between January 2017 and August 2019, when the automotive industry in India recorded its biggest slump in sales. Using monthly time-series data, the present study employs an autoregressive distributed lag (ARDL) approach to co-integration. The results show that there is evidence of a long-run co-integrating and negative relationship between the exchange rate and the S&P BSE Auto index. However, in the short run, lagged values of the auto index and crude oil price are found to have significant influences on the S&P BSE Auto index. Moreover, the error correction term (ECT) which indicates the short-run adjustment process is found to be negative and statistically significant. The study concludes that the S&P BSE Auto index can be predicted by the exchange rate (USD/INR) in the long run. However, in the short run, it can be predicted by the lagged values of crude oil price. Inconsistent with the existing literature, the association between lagged values of crude oil price and the S&P BSE Auto index is found to be positive. Results from this study have important implications for researchers, corporations, investors, portfolio managers, and governments alike.

Suggested Citation

  • Rhoda Alexander & Husam-Aldin N. Al-Malkawi, 2022. "On the Relationship Between Macroeconomic Factors and S&P BSE Auto Index: An ARDL Approach," Eurasian Studies in Business and Economics, in: Mehmet Huseyin Bilgin & Hakan Danis & Ender Demir & Ghulam Mustafa (ed.), Eurasian Business and Economics Perspectives, pages 245-263, Springer.
    • Handle: RePEc:spr:eurchp:978-3-030-94672-2_15
    DOI: 10.1007/978-3-030-94672-2_15
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