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India's policy stance on reserves and the currency

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  • Ila Patnaik

    (Indian Council for Research on International Economic Relations)

Abstract

Over the last decade, India engaged in substantial liberalisation on the current account and the capital account. At the same time, a fully articulated policy framework defining the currency regime is not known in the public domain. In this paper, we seek to characterise then ature of the currency regime, in the period after the Asian crisis. This is closely linked to better understanding the phenomenon of reserves accumulation of the recent years. Our results suggest that the main focus of the currency regime has been to deliver a low volatility of the nominal exchange rate. The rupee appears to be a de facto peg to the USD. In the last one year, reserves accumulation cannot be explained by insurance motivations; it seems to be a passive side effect of maintaining the currency regime

Suggested Citation

  • Ila Patnaik, 2003. "India's policy stance on reserves and the currency," Indian Council for Research on International Economic Relations, New Delhi Working Papers 108, Indian Council for Research on International Economic Relations, New Delhi, India.
    • Handle: RePEc:ind:icrier:108
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    Cited by:

    1. Ila Patnaik, 2007. "The Indian Currency Regime and its Consequences," Working Papers id:1062, eSocialSciences.
    2. Ajay Shah & Ila Patnaik, 2007. "India's Experience with Capital Flows: The Elusive Quest for a Sustainable Current Account Deficit," NBER Chapters, in: Capital Controls and Capital Flows in Emerging Economies: Policies, Practices, and Consequences, pages 609-644, National Bureau of Economic Research, Inc.
    3. Tony Cavoli & Ramkishen S. Rajan, 2005. "Have Exchange Rate Regimes in Asia become More Flexible Post crisis? Re-VISITING the EVIDENCE," Finance Working Papers 22563, East Asian Bureau of Economic Research.
    4. Ila Patnaik, 2003. "The Consequences of currency intervention in India," Indian Council for Research on International Economic Relations, New Delhi Working Papers 114, Indian Council for Research on International Economic Relations, New Delhi, India.
    5. Ramachandran, M. & Srinivasan, Naveen, 2007. "Asymmetric exchange rate intervention and international reserve accumulation in India," Economics Letters, Elsevier, vol. 94(2), pages 259-265, February.

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