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Factors Determining the Exchange Rate Movement under a Partial Capital Mobility Regime

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  • Hrushikesh Mallick

Abstract

The study examines the rupee-US dollar exchange rate (Rs/$) behaviour in the presence of increasing and ample capital inflows in the post-reform period in India. Using monthly data (1994:4 to 2007:8) the study estimates a basic exchange rate model in a time series framework in order to assess the relative significance of capital inflows in the presence of interest rate, inflation rate and growth rate differentials and other factors (forward exchange rate/expected exchange rate) in influencing the rupee-dollar exchange rate behaviour. It finds the dominance of foreign institutional investments affecting the rupee-dollar exchange rate and, to a certain extent, it is seen that the influence of the growth rate differential affects the exchange rate behaviour in India.

Suggested Citation

  • Hrushikesh Mallick, 2010. "Factors Determining the Exchange Rate Movement under a Partial Capital Mobility Regime," International Economic Journal, Taylor & Francis Journals, vol. 24(2), pages 249-266.
    • Handle: RePEc:taf:intecj:v:24:y:2010:i:2:p:249-266
    DOI: 10.1080/10168737.2010.486887
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    References listed on IDEAS

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    1. Sebastian Edwards, 1988. "Conclusion and Bibliography of Real Exchange Rates, Devaluation and Adjustment: Exchange Rate Policy In Developing Countries," UCLA Economics Working Papers 516, UCLA Department of Economics.
    2. Stock, James H & Watson, Mark W, 1993. "A Simple Estimator of Cointegrating Vectors in Higher Order Integrated Systems," Econometrica, Econometric Society, vol. 61(4), pages 783-820, July.
    3. Toda, Hiro Y. & Yamamoto, Taku, 1995. "Statistical inference in vector autoregressions with possibly integrated processes," Journal of Econometrics, Elsevier, vol. 66(1-2), pages 225-250.
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    Cited by:

    1. Kartono, Agus & Solekha, Siti & Sumaryada, Tony & Irmansyah,, 2021. "Foreign currency exchange rate prediction using non-linear Schrödinger equations with economic fundamental parameters," Chaos, Solitons & Fractals, Elsevier, vol. 152(C).
    2. Muhammad Kamran Khan & Jian-Zhou Teng & Muhammad Imran Khan, 2019. "Cointegration between macroeconomic factors and the exchange rate USD/CNY," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 5(1), pages 1-15, December.
    3. Syed Ali Raza & Sahar Afshan, 2017. "Determinants of Exchange Rate in Pakistan: Revisited with Structural Break Testing," Global Business Review, International Management Institute, vol. 18(4), pages 825-848, August.

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