Linkage between Crude Oil, Gold, INR-USD Reference Rate and Sensex amidst Covid-19 Pandemic: A Cointegration and Causality Analysis

Abstract

The primary purpose of this paper is to analyse the shortrun and long-run association between crude oil prices, gold prices, USD-INR reference rate, and stock market index across the COVID-19 pandemic. We have employed Johansen's cointegration test to measure the long-run association among the variables. To measure the short-run association of variables, we employed vector autoregression, and then, to find the direction of causality, we used the Granger causality test. The cointegration test results show that variables are not cointegrated in the precrisis as well as during the crisis period; hence, there is no long-run association among the variables. The VAR results show that gold price was influenced by the stock market index in the pre-crisis era; however, during the crisis, no association was observed. Similar results can also be found in crude oil, USD-INR reference rate, gold price, and stock market. The results also show that the relationships among the variables are dynamic and ever-changing in the preCOVID and during the COVID-19 pandemic.