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Managing Capital Flows: The Case of India

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  • Ajay Shah

    ()

  • Ila Patnaik

    ()

Abstract

From the early 1990s, India embarked on easing capital controls. Liberalization emphasised openness towards equity flows, both FDI and portfolio flows. In particular, there are few barriers in the face of portfolio equity flows. In recent years, a massive increase in the value of foreign ownership of Indian equities has come about, largely reflecting improvements in the size, liquidity and corporate governance of Indian frms. While the system of capital controls appears formidable, the de facto openness on the ground is greater than is apparent, particularly because of the substantial enlargement of the current account. These changes to capital account openness were not accompanied by commensurate monetary policy reform. The monetary policy regime has consisted essentially of a pegged exchange rate to the US dollar throughout. [WP No. 2008-52]

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Bibliographic Info

Paper provided by eSocialSciences in its series Working Papers with number id:1570.

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Date of creation: Jul 2008
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Handle: RePEc:ess:wpaper:id:1570

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Keywords: Indian; India; firms; governance; government; monetary policy; capital; US; USA; dollar; FDI; portfolio; flows; equities; equity; corporate governance;

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  1. Shah, Ajay, 2008. "New issues in Indian macro policy," Working Papers, National Institute of Public Finance and Policy 08/51, National Institute of Public Finance and Policy.
  2. Ajay Shah & Ila Patnaik, 2007. "India’s Experience with Capital Flows: The Elusive Quest for a Sustainable Current Account Deficit," NBER Chapters, National Bureau of Economic Research, Inc, in: Capital Controls and Capital Flows in Emerging Economies: Policies, Practices and Consequences, pages 609-644 National Bureau of Economic Research, Inc.
  3. repec:nbr:nberwo:11387 is not listed on IDEAS
  4. Wei, S.J. & Frankel, J.A., 1992. "Yen Bloc or Dollar Bloc: Exchange Rate Policies of the East Asian Economies," Papers, University of Birmingham - International Financial Group 92-08, University of Birmingham - International Financial Group.
  5. Manmohan Singh, 2007. "Use of Participatory Notes in Indian Equity Markets and Recent Regulatory Changes," IMF Working Papers, International Monetary Fund 07/291, International Monetary Fund.
  6. Chinn, Menzie David & Ito, Hiro, 2005. "What Matters for Financial Development? Capital Controls, Institutions, and Interactions," Santa Cruz Department of Economics, Working Paper Series, Department of Economics, UC Santa Cruz qt5pv1j341, Department of Economics, UC Santa Cruz.
  7. Claessens, Stijn & Schmukler, Sergio L., 2007. "International financial integration through equity markets: Which firms from which countries go global?," Journal of International Money and Finance, Elsevier, Elsevier, vol. 26(5), pages 788-813, September.
  8. Poonam Gupta & James P. F. Gordon, 2004. "Nonresident Deposits in India," IMF Working Papers, International Monetary Fund 04/48, International Monetary Fund.
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Citations

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Cited by:
  1. Eswar S. Prasad, 2008. "Some New Perspectives on India's Approach to Capital Account Liberalization," India Policy Forum, Global Economy and Development Program, The Brookings Institution, Global Economy and Development Program, The Brookings Institution, vol. 5(1), pages 125-178.
  2. Kodongo, Odongo & Ojah, Kalu, 2013. "Real exchange rates, trade balance and capital flows in Africa," Journal of Economics and Business, Elsevier, Elsevier, vol. 66(C), pages 22-46.
  3. Eswar S. Prasad, 2009. "India’s Approach to Capital Account Liberalization," Working Papers, eSocialSciences id:2043, eSocialSciences.

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