Abstract

The present research makes use of the Vector Error Correction Models (VECM) throughout the process of modelling in order to concurrently abstract the short-run data as well as the long-run data. This is accomplished via the employment of the VECM. This research makes use of the co integration estimation approach in order to analyse the long-term connection that exists between economic growth and stock prices for both Dehi and India. The research focuses on the relationship that exists between these two variables in Dehi. The results of the cointegration experiments reveal that economic development and stock prices have a link that, over the long term, tends to settle into a state of equilibrium for both Dehi and India. This is the case according to the findings of the experiments. The findings of the VECM indicate that the chain of causality in the instance of India flows from economic growth to stock prices, but not the other way around. This conclusion contradicts the hypothesis that stock prices cause economic growth. Despite this, the data suggest that there is a causal relationship between economic growth and stock prices for the state of Dehi, and that this link operates in both ways. Specifically, this link operates in the direction of economic growth.

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