International Journal For Multidisciplinary Research

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Crude Oil Price Shocks and the Indian Rupee–US Dollar Exchange Rate Evidence from a Nonlinear ARDL Model

Author(s) Dr. Cinoj George
Country India
Abstract Abstract
This study examines whether increases and decreases in international crude-oil prices are associated differently with the Indian rupee–US dollar exchange rate. Monthly data from January 2006 to April 2021 combine INR per US dollar, Brent crude oil, a broad trade-weighted US dollar index, and the India–United States short-term interest-rate differential. A nonlinear autoregressive distributed lag model decomposes log Brent changes into positive and negative partial sums and separates impact dynamics from conditional long-run responses. Bayesian-information-criterion selection yields a parsimonious NARDL(1,0) error-correction specification. The bounds statistic (F = 2.222) lies below the 10% lower bound for four regressors; consequently, the data do not establish a stable level relationship and conditional long-run coefficients are not interpreted as confirmed cointegrating effects. The error-correction loading is negative (−0.0785, p = 0.0039), but this does not override the bounds decision. Contemporaneous oil-increase and oil-decrease terms are individually insignificant, and the short-run symmetry restriction is not rejected (F = 0.199, p = 0.656). A conditional equality test for level oil components is rejected (F = 4.865, p = 0.029), but its economic interpretation remains provisional without bounds cointegration. Broad dollar movements dominate monthly USD/INR changes. The results show why nonlinear modelling adds diagnostic value even when asymmetry is not robustly established: it prevents an unsupported symmetric long-run narrative and identifies where evidence is conditional. Implications concern reserve management, oil-import hedging, and cautious use of nonlinear exchange-rate models.
Keywords Crude oil prices; USD/INR exchange rate; NARDL; asymmetric adjustment; India
Field Mathematics > Economy / Commerce
Published In Volume 8, Issue 5, September-October 2026
Published On 2026-09-21
DOI https://doi.org/10.36948/ijfmr.2026.v08i05.88113
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