The Effect of Brent Crude Prices on the Exchange Rate between INR/USD and INR/EURO
The aim of this paper is to try to find out the effects of changing Brent Crude Prices on the exchange rate between INR and USD and INR and EURO. The GARCH test is performed to version the volatility of alternate fees and DCC-GARCH is used to version the time variation conditional correlation and to ascertain the effect of oil prices on trade charge using day by day time set facts during the length between January 1st 2011 and December 31st, 2017. The test findings display that a boom in oil prices results in a depreciation of the exchange rate of INR in opposition to USD/EURO. It is a well-established fact that any change whether increase or decrease of oil prices effects the exchange rate of exporting country in a positive manner and importing country in a negative manner, since India is one of the biggest oil importer in the world It is always on losing end, if oil prices are increased. It should also be noted that depreciation of exchange rate directly affects other variables also like price, output, Interest rates and money. Hence, It can be surmised easily that oil prices are very significant variable for determining the strength of the currency and its volatile behavior. It is advisable for Indian government to take into consideration the effects of oil prices while making and prosecuting economic policies especially the exchange rate policies.