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India and the Impossible Trinity

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  • Vijay Joshi

Abstract

In the 1990s, India responded to the well‐known trilemma of macroeconomic policy by adopting an intermediate exchange rate system combined with selective capital controls. This regime enabled the country to balance exchange rate stability, exchange rate targeting and monetary autonomy, and to weather successfully various shocks that included contagion from the East Asian crisis. India's experience serves to reinforce doubts about the desirability of bipolar exchange rate regimes for developing countries as an integral element of a new international financial architecture.

Suggested Citation

  • Vijay Joshi, 2003. "India and the Impossible Trinity," The World Economy, Wiley Blackwell, vol. 26(4), pages 555-583, April.
    • Handle: RePEc:bla:worlde:v:26:y:2003:i:4:p:555-583
    DOI: 10.1111/1467-9701.00537
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    References listed on IDEAS

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    1. John Williamson, 1998. "Crawling Bands or Monitoring Bands: How to Manage Exchange Rates in a World of Capital Mobility," International Finance, Wiley Blackwell, vol. 1(1), pages 59-79, October.
    2. Mr. Akira Ariyoshi & Mr. Andrei A Kirilenko & Ms. Inci Ötker & Mr. Bernard J Laurens & Mr. Jorge I Canales Kriljenko & Mr. Karl F Habermeier, 2000. "Capital Controls: Country Experiences with Their Use and Liberalization," IMF Occasional Papers 2000/009, International Monetary Fund.
    3. Jeffrey A. Frankel, 1999. "No Single Currency Regime is Right for All Countries or At All Times," NBER Working Papers 7338, National Bureau of Economic Research, Inc.
    4. Stanley Fischer, 2001. "Exchange Rate Regimes: Is the Bipolar View Correct?," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 3-24, Spring.
    5. Vijay Joshi, 2001. "Capital Controls and the National Advantage: India in the 1990s and Beyond," Oxford Development Studies, Taylor & Francis Journals, vol. 29(3), pages 305-320.
    6. Richard N. Cooper, 1999. "Should Capital Controls be Banished?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 30(1), pages 89-142.
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    Cited by:

    1. Amit Ghosh & Ramya Ghosh, 2012. "Capital controls, exchange rate regime and monetary policy independence in India," International Journal of Economic Policy in Emerging Economies, Inderscience Enterprises Ltd, vol. 5(3), pages 212-230.
    2. Mansur, Alfan, 2016. "Kebijakan Moneter dan Volatilitas Pasar Keuangan [Monetary Policy and the Financial Market's Volatility]," MPRA Paper 93880, University Library of Munich, Germany, revised 15 Sep 2016.
    3. Sen Gupta, Abhijit, 2010. "Management of International Capital Flows: The Indian Experience," MPRA Paper 23747, University Library of Munich, Germany.
    4. Knedlik, Tobias & Ströbel, Johannes, 2006. "The role of banking portfolios in the transmission from currency crises to banking crises - potential effects of Basel II," IWH Discussion Papers 21/2006, Halle Institute for Economic Research (IWH).
    5. Sushanta Mallick & Helena Marques, 2008. "Passthrough of Exchange Rate and Tariffs into Import Prices of India: Currency Depreciation versus Import Liberalization," Review of International Economics, Wiley Blackwell, vol. 16(4), pages 765-782, September.
    6. Moritz Cruz & Bernard Walters, 2008. "Is the accumulation of international reserves good for development?," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 32(5), pages 665-681, September.
    7. Vijay Joshi, 2003. "Financial Globalisation, Exchange Rates and Capital Controls in Developing Countries," Departmental Working Papers 2003-19, The Australian National University, Arndt-Corden Department of Economics.
    8. Padhan, Hemachandra & Sahu, Santosh Kumar & Dash, Umakant, 2021. "Non-linear analysis of international reserve, trade and trilemma in India," The Journal of Economic Asymmetries, Elsevier, vol. 23(C).
    9. Ajay Shah, 2008. "New issues in Indian macro policy," Working Papers id:1478, eSocialSciences.
    10. Goh, Soo Khoon, 2009. "Managing the Impossible Trinity: The Case of Malaysia," MPRA Paper 18094, University Library of Munich, Germany.
    11. 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.
    12. Desh Gupta & Milind Sathye, 2004. "Financial Developments in India: Should India introduce capital account convertibility?," ASARC Working Papers 2004-07, The Australian National University, Australia South Asia Research Centre.
    13. Helder Ferreira de Mendonça & Igor da Silva Veiga, 2017. "The open economy trilemma in Latin America: A three-decade analysis," International Finance, Wiley Blackwell, vol. 20(2), pages 135-154, June.
    14. 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.

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