Oil Price Shocks and Macro-economy in India: An Asymmetric Approach

The study investigates the dynamic impact of asymmetric oil price shocks on India's macroeconomy based on a monthly time series data from 1992:04 to 2013:08 using the method of multivariate vector autoregression (VAR). The study confirms that movement in oil price is exogenous with respect to India's macroeconomic movements i.e. India has not yet obtained the power of oil pricing in the world oil markets. The study also confirms that impact of oil price shocks are asymmetric in nature with negative oil price shocks having more pronounced effect on India's macroeconomy while, the impact of positive oil shocks is not significant. The structural stability test found no evidence of any structural break in the oil price macroeconomy relationship in the Indian context.