Capital Flow Volatility And Exchange Rates-- The Case Of India
AbstractThis paper examines the relationship between the real exchange rate, level of capital flows, volatility of the flows, fiscal and monetary policy indicators and the current account surplus for the Indian economy for the period 1993Q2 to 2004Q1. The estimations indicate that the variables are cointegrated and each granger causes the real exchange rate. The generalized variance decompositions show that determinants of the real exchange rate, in descending order of importance include net capital inflows and their volatility (jointly), government expenditure, current account surplus and the money supply. A preliminary analysis suggests that a similar analysis can be performed for the foreign exchange reserves held by the RBI.
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Bibliographic InfoPaper provided by Centre for Development Economics, Delhi School of Economics in its series Working papers with number 144.
Length: 40 pages
Date of creation: Aug 2006
Date of revision:
Find related papers by JEL classification:
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-10-07 (All new papers)
- NEP-CBA-2006-10-07 (Central Banking)
- NEP-CWA-2006-10-07 (Central & Western Asia)
- NEP-FMK-2006-10-07 (Financial Markets)
- NEP-IFN-2006-10-07 (International Finance)
- NEP-MAC-2006-10-07 (Macroeconomics)
- NEP-MON-2006-10-07 (Monetary Economics)
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