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India's Experience in Navigating the Trilemma: Do Capital Controls Help?

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  • R. Kohli

    ()
    (Indian Council for Research on International Economic Rela)

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    Abstract

    Managing capital flows is the key policy challenge for emerging economies like India in the aftermath of the crisis. In contrast to other emerging markets who are levying capital controls, India‘s macro-monetary framework is distinguished by significant restrictions that help manage inflows. Against this context, the paper characterizes India‘s capital account management strategy through illustrating the 2006-07 episodes of capital inflows in the buildup to the global financial crisis. It shows how these restrictions allowed the authorities to straddle the open-economy trilemma and balance the exchange rate and price stability objectives. It offers relevant evidence on the effectiveness of India‘s capital controls in retaining monetary autonomy.

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    File URL: http://www.icrier.org/pdf/WORKING_PAPER_257.pdf
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    Bibliographic Info

    Paper provided by Indian Council for Research on International Economic Relations, New Delhi, India in its series Indian Council for Research on International Economic Relations, New Delhi Working Papers with number 257.

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    Length: 27 Pages
    Date of creation:
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    Handle: RePEc:ind:icrier:257

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    Related research

    Keywords: Capital flows; Capital account liberalization; monetary independence; India; trilemma;

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    References

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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    1. Benedict J. Clements & Herman Kamil, 2009. "Are Capital Controls Effective in the 21st Century? the Recent Experience of Colombia," IMF Working Papers 09/30, International Monetary Fund.
    2. Aizenman, Joshua & Chinn, Menzie David & Ito, Hiro, 2009. "Assessing the Emerging Global Financial Architecture: Measuring the Trilemma's Configurations over Time," Santa Cruz Department of Economics, Working Paper Series qt840728sc, Department of Economics, UC Santa Cruz.
    3. Yin-Wong Cheung & Menzie D. Chinn & Eiji Fujii, 2003. "The Chinese Economies in Global Context: The Integration Process and Its Determinants," NBER Working Papers 10047, National Bureau of Economic Research, Inc.
    4. Guonan Ma & Corrinne Ho & Robert N McCauley, 2004. "The markets for non-deliverable forwards in Asian currencies," BIS Quarterly Review, Bank for International Settlements, June.
    5. Nicolas E. Magud & Carmen M. Reinhart & Kenneth S. Rogoff, 2011. "Capital Controls: Myth and Reality - A Portfolio Balance Approach," NBER Working Papers 16805, National Bureau of Economic Research, Inc.
    6. Maurice Obstfeld, 2009. "International Finance and Growth in Developing Countries: What Have We Learned?," NBER Working Papers 14691, National Bureau of Economic Research, Inc.
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