IDEAS home Printed from https://ideas.repec.org/p/hal/journl/hal-05625974.html

The Structural Metamorphosis of USD-INR Fluctuations (2006–2026): An Empirical Investigation of Macroeconomic Determinants Using ARDL and VAR Frameworks

Author

Listed:
  • Rupak Kumar Tung

    (Faculty of Economics, PG. Department of Economics, Vikram Dev University, Jeypore, India.)

Abstract

The USD–INR exchange rate in India from (2006–2026), focusing on the shift from domestic inflation-driven dynamics to increasing sensitivity to external sector risks and global capital flow movements. This study investigates the macroeconomic determinants of the USD-INR exchange rate fluctuations over a twenty-year period (2006–2026), tracking India's transition from internal inflationary volatility to external sector vulnerability. Utilizing ARDL and VAR methodologies to analyze a dataset encompassing Crude Oil, Gold Prices, CPI Inflation, and Interest Rate Differentials, the empirical results reveal that the Trade Deficit (r = 0.87) and Gold Prices (r= 0.86) are the most dominant structural drivers of Rupee depreciation. Notably, while India successfully anchored domestic inflation—reducing CPI from 11.99% in 2010 to 3.21% in 2026—the currency remains highly sensitive to the narrowing interest rate gap between India and the US (β = 3.429), which triggered a record $115.1 billion capital outflow in early 2026. The findings conclude that the Rupee's stability is now dictated more by global "risk-off" sentiments and safe-haven asset demand than by domestic price growth. The study recommends a policy shift toward Gold import rationalization and the maintenance of a strategic interest rate buffer to insulate the economy from global monetary tightening and sudden capital flight.

Suggested Citation

  • Rupak Kumar Tung, 2026. "The Structural Metamorphosis of USD-INR Fluctuations (2006–2026): An Empirical Investigation of Macroeconomic Determinants Using ARDL and VAR Frameworks," Post-Print hal-05625974, HAL.
    • Handle: RePEc:hal:journl:hal-05625974
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a
    for a similarly titled item that would be available.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:journl:hal-05625974. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.