IDEAS home Printed from https://ideas.repec.org/a/icf/icfjmo/v06y2008i2p43-49.html
   My bibliography  Save this article

Bank Rate and Interest Yield Differentials as Determinants of Foreign Exchange Rate in India

Author

Listed:
  • Mita H Suthar

Abstract

Considering that foreign exchange rate is the price of domestic currency in terms of a foreign country’s currency, it can be established that the market price of domestic currency would depend largely on the demand-side and supply-side factors influencing the foreign exchange market of a country. This is especially true in the case of an economy where either free-float or managed-float exists. The present research tests the validity of this notion in part, by considering the supply-side factors influencing the foreign exchange market of India, against the dollar. These factors include various types of interest rates and interest rate differentials between India and the US, money supply and foreign exchange reserves of India. Considering the impact of money supply, the role of monetary policy through the management of bank rate policy of the Reserve Bank of India (RBI) can also be influential. Application of OLS method on a monthly time series from April 1996 to January 2006, indicates that bank rate of the RBI, the short-term and long-term domestic interest differentials and interest yield differentials, and the growth rate of foreign exchange reserves determine the rupee-dollar exchange rate to a significant extent.

Suggested Citation

  • Mita H Suthar, 2008. "Bank Rate and Interest Yield Differentials as Determinants of Foreign Exchange Rate in India," The IUP Journal of Monetary Economics, IUP Publications, vol. 0(2), pages 43-49, May.
    • Handle: RePEc:icf:icfjmo:v:06:y:2008:i:2:p:43-49
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Moid U. Ahmad, 2015. "Does CRR and Repo Change Affect Corporate Output?," Jindal Journal of Business Research, , vol. 4(1-2), pages 115-125, June.
    2. Moid U. AHMAD & Shamima NASRIN, 2017. "An analysis of the effect of monetary policy changes on macroeconomic factors," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(2(611), S), pages 303-318, Summer.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:icf:icfjmo:v:06:y:2008:i:2:p:43-49. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: G R K Murty (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.