Academy of Accounting and Financial Studies Journal (Print ISSN: 1096-3685; Online ISSN: 1528-2635)

Abstract

Analysis of the Effect of Currency Exchange Rate, Broad Money (M3) and Oil Prices on Inflation in India

Author(s): Shikha Sharma, Manju Dahiya

Inflation is characterised in a variety of ways. In general purpose dictionaries, such as the one produced by Orient Longman, inflation is defined as "a decrease in the value of money," not as "an increase in the consumer price index," as Goodhart observed (2000). Inflation is defined as "a persistent rise in the general price level usually attributed to an increase in the volume of money and credit compared to available goods and services," according to the Merriam-Webster dictionary. Inflation is described as a prolonged increase in the overall level of prices for goods and services, according to online economics dictionaries such as 'investopedia.com.' It is expressed as a percentage rise each year. It also represents money's dwindling purchasing value. Purpose: Inflation has become a major concern for India's economic authorities and citizens in the previous decade. Worries arose when the inflation rate (defined as the change in the consumer price index over a twelve-month period) increased from 3.7 percent to 12.1 percent between 2001 and 2010. Inflation has since reduced to 5.2 percent in early 2015, but is on the rise again post-covid, with a 2020 inflation estimate of 6.2 percent Methodology: This is a quantitative and analytical research. Data analysis is done mainly by statistical and econometric methods. The data analysis is done using Vector Auto Correlation Model (VECM). Findings: Broad Money and Currency exchange rate have shown negative effect on inflation on the other hand oil prices have positive impact on inflation in long run.

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