Journal Press India^®

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Exchange rate regime has a significant impact on foreign trade and financial flows. After Independence, India had chosen fixed exchange system where Indian currency was pegged to US Dollar or Pound sterling. From March 1993, India has adopted market determined exchange rate. The International Market is affected by markets of different countries and currencies, where fluctuation in one currency has an influence on other currencies. The present paper is an attempt to study movement of selected currencies and causality effect. The paper examines co-movement and causal effect of selected currencies using monthly closing of selected currencies from 2013 to 2018. To conduct this study, four currencies have been chosen: Euro-INR, GBP-INR, YEN-INR and USD-INR on the basis of volatility. To draw conclusion, econometric tools such as Unit root test (ADF), Granger causality test and correlation have been applied. The results of the study indicate that there is no major causal effect observed. So it can be inferred that selected series are free from causal effect and movement and fluctuation are random.

Keywords

USD; YEN; EURO; Pound; Econometric analysis

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