An Empirical Study of Selected Macro-Economic Indicators with Respect to Indian Economy

This paper tends to convey the relationship between macroeconomic indicators and Inflation. The Pearson's correlation and multivariate stepwise regression is applied to understand the impact of macroeconomic indicators on the Inflation. Hypothesis test is applied for the causal relationship among the variables. The explained variables in the study includes monthly closing price of Inflation (WPI) and Inflation (CPI) while the explanatory variables are Bank Rate, Cash Reserve Ratio (CRR), Repo Rate, Reserve Repo Rate and Government Securities Yields for various maturities namely, GOI yield of 1 year maturity, GOI yield of 5 year maturity, GOI yield of 10 year maturity, GOI yield of 15 year maturity. The data used in the study is in the monthly frequency and period of the study includes from April 2004 to March 2013. The empirical results exhibit significant impact of macroeconomic indicators on Inflation.