Published Online:July 2025
Product Name:The IUP Journal of Applied Economics
Product Type:Article
Product Code:IJAE030725
DOI:10.71329/IUPJAE/2025.24.3.41-57
Author Name:Byasadev Padhan
Availability:YES
Subject/Domain:Economics
Download Format:PDF
Pages:41-57
This study examines the impact of oil prices, economic policy uncertainty, and geopolitical risk on the exchange market pressure (EMP) of the Indian currency. Instead of analyzing the effects on exchange rate, the study uses the EMP Index of Patnaik et al. (2017) to provide a broader policy perspective. Using nonlinear autoregressive and distributed lag (NARDL) model and monthly data for the period January 2003 to December 2019, the study finds a positive effect of economic policy uncertainty and an asymmetric effect of oil prices on exchange market pressure.
Financial turbulence marked the end of the 20th century and the beginning of the 21st, with several financial crises spanning different countries, such as the crises of Argentina (2001-2002), Greece (2011), and Russia (2014); European exchange rate crisis of 1993; and global crises like Asian crisis and global financial crisis. According to García and Malet (2007), excessive pressure in the forex market is the reason behind the frequent breakdown of currency. Concurrently, economic policy uncertainty (EPU) has risen globally. Further, the increasing complexity of economic and market-related processes has heightened the level of uncertainty in economic policy (Krol, 2014). Consequently, several academics have suggested a connection between financial markets and EPU.