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Does Full Sterilization Feasible in Era of Excess Volatility: Evidence from India

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  • Chandan Sharma

    (Economics and Business Policy, FORE School of Mangement)

Abstract

India has accumulated a huge pile of international reserves, which is certainly more than the country's precautionary requirements. In this study, I test the extent and impact of the sterilization in India by using Toda and Yamamoto version of Granger Causality and Impulse Response function. The results of the analysis reveal that in India, the central bank (RBI) has been pursuing the sterilization policy, however, not able to fully insulate the domestic market from the external shocks.

Suggested Citation

  • Chandan Sharma, 2009. "Does Full Sterilization Feasible in Era of Excess Volatility: Evidence from India," Economics Bulletin, AccessEcon, vol. 29(4), pages 2944-2950.
    • Handle: RePEc:ebl:ecbull:eb-09-00553
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    References listed on IDEAS

    as
    1. Takeshi Inoue & Shigeyuki Hamori, 2014. "An Empirical Analysis of the Money Demand Function in India," World Scientific Book Chapters, in: INDIAN ECONOMY Empirical Analysis on Monetary and Financial Issues in India, chapter 2, pages 9-26, World Scientific Publishing Co. Pte. Ltd..
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    6. Joshua Aizenman & Jaewoo Lee, 2007. "International Reserves: Precautionary Versus Mercantilist Views, Theory and Evidence," Open Economies Review, Springer, vol. 18(2), pages 191-214, April.
    7. 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.
    8. Ouyang, Alice Y. & Rajan, Ramkishen S. & Willett, Thomas D., 2010. "China as a reserve sink: The evidence from offset and sterilization coefficients," Journal of International Money and Finance, Elsevier, vol. 29(5), pages 951-972, September.
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    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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