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The difficulties of the Chinese and Indian exchange rate regimes

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  • Patnaik, Ila

    ()
    (National Institute of Public Finance and Policy)

  • Shah, Ajay

    ()
    (National Institute of Public Finance and Policy)

Abstract

China and India have both sought control over the exchange rate in order to maintain export competitiveness, manage current account balance, and pursue independent monetary policy. In this paper, we examine structural change in the Chinese and Indian de facto exchange rate regimes, focusing on the period from 1998 to 2007. With increasing capital account openness, exchange rate inflexibility has been associated with significant monetary policy distortions. In both countries, the short-term rate expressed in real terms dropped, and achieved very low values, in the unprecedented business cycle expansion of the early 2000s. In the Indian case, difficulties of sterilisation led to a modification of the exchange rate regime, moving towards greater flexibility. In China, in contrast, the exchange rate regime did not change.

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Bibliographic Info

Paper provided by National Institute of Public Finance and Policy in its series Working Papers with number 09/62.

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Length: 20
Date of creation: Aug 2009
Date of revision:
Handle: RePEc:npf:wpaper:09/62

Note: Working Paper 62, 2009
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Web page: http://www.nipfp.org.in

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Cited by:
  1. Ajay Shah & Ila Patnaik, 2010. "Asia Confronts the Impossible Trinity," Working Papers id:2402, eSocialSciences.
  2. Enrico Marelli & Marcello Signorelli, 2011. "China and India: Openness, Trade and Effects on Economic Growth," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 8(1), pages 129-154, June.
  3. Ila Patnaik & Ajay Shah, 2012. "Did the Indian Capital Controls Work as a Tool of Macroeconomic Policy?," IMF Economic Review, Palgrave Macmillan, vol. 60(3), pages 439-464, September.
  4. Almas Heshmati & Subal C. Kumbhakar, 2010. "Technical Change and Total Factor Productivity Growth: The Case of Chinese Provinces," TEMEP Discussion Papers 201054, Seoul National University; Technology Management, Economics, and Policy Program (TEMEP), revised Feb 2010.
  5. Shirai, Sayuri, 2009. "世界経済危機とグローバル・マネーの変動 ―国際経済秩序へのインプリケーションー
    [Global Economic Crisis and Movements of Cross-Border Capital Flows ―Implicatio
    ," MPRA Paper 18619, University Library of Munich, Germany.

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