Asian Journal of Information Management1819-334x2152-3479Academic Journals Inc.10.3923/ajim.2012.1.15SharmaGagan Deep SinghSanjeet MahendruMandeep 1201261Macroeconomic variables like Economic output, Unemployment and Inflation etc. play a vital
role in the economic performance of a country. For the past three decades, evidence of key
macroeconomic variables helping predict the time series of stock returns has accumulated in direct
contradiction to the conclusions drawn by the Efficient Market Theory. This paper studied the
pattern of Consumer Price Index (CPI), Wholesale Price Index (WPI), Gross Domestic Product
(GDP), Gross National Income (GNI) and rate of interest in India and Sri Lanka. Monthly data
from 2002 onwards to 2009 has been used in case of all the variables. The econometrics tools i.e.,
unit root test, Granger causality test, cointegration test, vector auto regression and variance
decomposition analysis have been used for the analysis purpose. All the tools dont lead us to any
common result. Granger model and VAR model indicates that CPI, WPI and exchange rate does
not have any influence on each other in the case of both of the countries but the Variance
decomposition model shows visible impact of macroeconomic variables on each other in some of the
cases in Indian and Sri Lankan data. The present study finds that the macro-economic variables
i.e., exchange rates, bank rates, WPI, CPI, GNI and balance of payments play a pivotal role in
determining the Gross Domestic Product (GDP) in India and Sri Lanka.]]>Aizenman J. and I. Noy,200913175189Arora, V.B. and A. Vamvakidis,20012001Białkowski, J., K. Gottschalk and T.P. Wisniewski,20083219411953Black, A., P. Fraser and R. MacDonald,199765379393Blomberg, S.B., G. Hess and A. Weerapana,2004211728Chen, N.F., R. Roll and S.A. Ross,198659383403Chiang, L.C. and H.T. Kee,20092009pp: 112Fama, E.F. and K.R. French,1989252349Gan, C., M. Lee, H.H.A. Young and J. Zhang, 2006389101Granger, E.J. and N.R. Swanson,19961996Hasan, A. and T. Javed,200914115137Humpe, A. and P.D. Macmillan,20052005Liljeblom, E., A. Loflund and S. Krokfors,199721469490Liu, M.H. and K.M. Shrestha,200834744755Maysami, R.C. and T.S. Koh,200097996Mukherjee, T.K. and A. Naka,199518223237Patra, T. and S. Poshakwale,2006169931005Paul, S. and G. Mallik,20012001Schwert, G.W.,1990377102Sharma, S.C. and P. Wongbangpo,200211299315