We investigate the impact of COVID-19 on the Indian financial market and compare it with the outcomes of two recent structural changes of the Indian economy: demonetization and implementation of the Goods and Services Tax (GST). Using daily stock return, net foreign institutional investment, and exchange rate data from January 3, 2003 to April 20, 2020, we find negative stock returns for all the indices during the COVID-19 outbreak, unlike during the post-demonetization and GST phases. Markov switching vector autoregression shows the impact of COVID-19 on stock returns is severe in comparison to that of demonetization and the GST.

This article attempts to examine whether stock market and foreign exchange markets are related to each other or not. The study uses Granger’s Causality test and Vector Auto Regression technique on monthly stock return, exchange rate, interest rate and demand for money for the period April 1992 to March 2002. The major findings of the study are ( a) there exists a unidirectional causality between the exchange rate and interest rate and between the exchange rate return and demand for money; ( b) there is no Granger’s causality between the exchange rate return and stock return. Through Vector Auto Regression modelling, the study confirms that though stock return, exchange rate return, the demand for money and interest rate are related to each other but any consistent relationship doesn’t exist between them. The forecast error variance decomposition further evidences that ( a) the exchange rate return affects the demand for money, ( b) the interest rate causes exchange rate return change ( c) the exchange rate return affects the stock return, ( d) the demand for money affects stock return, ( e) the interest rate affects the stock return, and ( f) the demand for money affects the interest rate. Our results have implications for investors, policy makers and researchers.

Background: The suitability and performance of the bankruptcy prediction models is an empirical question. The aim of this paper is to develop a bankruptcy prediction model for Indian manufacturing companies on a sample of 208 companies consisting of an equal number of defaulted and non-defaulted firms. re-estimated models to explore the sensitivity of these models towards the change in time periods and financial conditions. Methods: Multiple Discriminant Analysis (MDA) and Probit techniques are employed in the estimation of Z-Score and X-Score models, whereas Logit technique is employed in the estimation of Y-Score and the newly proposed models. The performance of all the original, re-estimated and new proposed models are assessed by predictive accuracy, significance of parameters, long-range accuracy, secondary sample and Receiver Operating Characteristic (ROC) tests. Results: The major findings of the study reveal that the overall predictive accuracy of all the three models improves on estimation and holdout sample when the coefficients are re-estimated. Amongst the contesting models, the new bankruptcy prediction model outperforms other models.

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This article investigates the existence of a threshold level of inflation and how any such level affects the growth of Indian economy. The article also seeks to examine the dynamic short-run and long-run relationship between inflation and economic growth in India. By employing spline regression method to estimate the threshold level of inflation and the long-run and short-run relationships, the results show a statistically significant structural break in the relationship between inflation and economic growth at 4 per cent. The study suggests that if inflation exceeds the threshold point, that is, 4 per cent, it will negatively affect economic growth. The autoregressive distributed lag (ARDL) model bound testing cointegration suggests that there are two cointegration vectors when gross domestic product and rate of interest are considered as the dependent variables. This result confirms the existence of the long-run equilibrium relationship between economic growth, inflation, exchange rate and rate of interest. From the long-run analysis, the study found that inflation is positively related to economic growth, whereas the other variables are not significant. JEL Classification: E4, E6