Assessing the Financial Markets Inter-Relation during EBLR Regime: An Evidence from India
DOI:
https://doi.org/10.31305/rrijm.2025.v10.n11.006Keywords:
Financial Markets, Interconnectedness, Co-Integration, Granger Causality, EBLRAbstract
This paper uses time series Co-Integration methodology and Granger Causality to check the status of financial market interconnectedness in India after the implementation of External Benchmark linked Lending Rate (EBLR) since October 2019 to July 2024. The markets used in the study are Money Market, Foreign Exchange Market, Government Securities Market and Stock Market. The results indicates that the stock market, despite having long-run relationship with all markets had stable relation only with foreign exchange market. Similarly, many pairs of market showed unstable long-run relationship. Causality test demonstrated causality from money market to foreign exchange market and government securities market demonstrating the independence of robust domestic liquidity operation. There is also causality from foreign exchange market to stock market and government securities market. Rest of pairs did not show any causality, showing the necessity of policy reforms to remove the barriers of free capital flow in the financial market.
JEL Classification Code: C01, E44, F36
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