Kakali Kanjilal

Oil price shocks on Indian economy: evidence from Toda Yamamoto and Markov regime-switching VAR

The study investigates the dynamic impact of linear and non-linear specifications of oil price shocks on macroeconomic fundamentals for an oil-importing emerging economy – India – during the period March 1991 to January 2009. The paper deploys extended vector autoregressive (VAR) model of possibly integrated processes proposed by Toda and Yamamoto, which has its advantage of application irrespective of the variables being stationary or cointegrated. The study further estimates two-state Markov regime-switch VAR model to examine regime shift behaviour of the underlying variables and its relationship. The study finds that inflation and foreign exchange reserve are greatly impacted by oil price shocks. The study also confirms that the movement in oil price is exogenous with respect to the movement of India’s macroeconomic variables and the impact of oil price shocks are asymmetric in nature with negative price shocks having more pronounced effect than positive shocks.

Rational expectation hypothesis: empirical evidence from government debt market in India

This article tests the validity of rational expectation hypothesis (REH) for government securities market in India for the period Jul-97 through Feb-04. REH states that the return on longer-term instrument is equal to the expected average of the short-term instruments which is expected to occur over the life of the long-term instrument. The theory has been empirically tested by a large number of researchers, mostly for developed countries and the findings are often controversial. The study tests the expectation hypothesis theory through establishing a cointegrating relationships for the government securities market consisting of short-term, medium-term and long-term instruments. It used zero coupon interest rates of one month, three months, six months, three years and ten years of maturities. The article finds four cointegrating relationships suggesting the validity of expectation hypothesis for the government securities market in India. This indeed ensures the smooth functioning of debt market in India which gives an indication that the yield curve should serve as an indicator to the monetary policymakers to manage inflation and to influence the aggregate demand in the economy.

Modelling and forecasting of day-ahead electricity price in Indian energy exchange – evidence from MSARIMA-EGARCH model

Electricity prices often exhibit extreme volatility due to its non-storable nature coupled with significant seasonal and diurnal variations of demand, supply constraints at peak hours and transmission bottlenecks. This study tries to forecast day-ahead hourly electricity price of Indian energy exchange (IEX) with an additional objective of modelling the volatility using MSARIMA and MSARIMA-EGARCH models. It has been found that MSARIMA-EGARCH model slightly outperform MSARIMA model in terms of in-sample forecasting performances. The study reveals that seasonality and time-varying volatility are present and past shocks to the variance are asymmetric with negative shocks give rise to higher volatility of price than positive shocks. The study also establishes that shocks to electricity price volatility die out almost instantaneously. The above information can help to build up cost effective risk management plans for the participating companies in IEX.

Non-linear dynamics of hot and cold cycles in Indian IPO markets: evidence from Markov regime-switching vector autoregressive model

ABSTRACT The study aims to examine non-linear relationship between initial public offering (IPO) volume and average monthly initial returns for ‘hot’ and ‘cold’ issuing cycles in the Indian IPO markets using a two-state Markov regime-switching vector autoregressive model. The sample considers 557 IPOs during the period 2004–2014. The study establishes the presence of hot and cold states in Indian IPO markets. It finds bidirectional causality between IPO volume and initial returns for ‘hot’ issuing periods. The empirical findings suggest that the market possesses valuable information content in terms of the past issuing activity which has the potential to increase the predictability of future market behaviour.

Book Review: How Some Small Businesses Get Their Ducks in a Row and Grow—While Others Remain Undistinguished

Shil Niyogi, How Some Small Businesses Get Their Ducks in a Row and Grow—While Others Remain Undistinguished. New Delhi: SAGE South Asia Edition, SAGE Publications India Pvt Ltd, 2012, 197 pp., ₹ 350 (ISBN: 978-81-321-0753-8[PB])