Does Globalization Cause the Loss of Monetary-Policy Independence in Developing Economies? A Case Study with India
In: Proceedings of the Conference on Globalization and Its Discontents
This paper examines whether globalization causes the loss of monetary-policy independence in developing economies. By using India as a case study we find that globalization does not necessarily cause the loss of monetary-policy independence. A country with foreign exchange constraints may lose its monetary-policy independence even in the absence of globalization under limited capital flows as long as it attempts to maintain a fixed or a stable exchange rate. This was the case in the 1960s when India controlled capital flows, maintained a fixed exchange rate, and Indian interest rates used to follow US interest rates in a significant way. In contrast, a country can exercise monetary-policy independence even under free capital flows as long as it does not maintain a stable exchange rate. Thus, monetary-policy independence is anchored in the nature of the exchange-rate regime along with the state of foreign-exchange constraint, and not necessarily in globalization per se.
|This chapter was published in: ||This item is provided by Izmir University of Economics in its series Papers of the Annual IUE-SUNY Cortland Conference in Economics with number
200712.||Handle:|| RePEc:izm:prcdng:200712||Contact details of provider:|| Fax: (90) 232 279 2626|
Web page: http://eco.ieu.edu.tr
More information through EDIRC
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.:
- Guillermo A. Calvo & Carmen M. Reinhart, 2002.
"Fear of Floating,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 117(2), pages 379-408.
- Guillermo A. Calvo & Carmen M. Reinhart, 2000. "Fear of Floating," NBER Working Papers 7993, National Bureau of Economic Research, Inc.
- Reinhart, Carmen & Calvo, Guillermo, 2002. "Fear of floating," MPRA Paper 14000, University Library of Munich, Germany.
- Reinhart, Carmen, 2001. "Fear of Floating: Exchange Rate Flexibility Indices," MPRA Paper 13196, University Library of Munich, Germany.
- M S Mohanty & Michela Scatigna, 2005. "Has globalisation reduced monetary policy independence?," BIS Papers chapters,in: Bank for International Settlements (ed.), Globalisation and monetary policy in emerging markets, volume 23, pages 17-58 Bank for International Settlements.
- Kohli, Renu, 2008. "Liberalizing Capital Flows: India's Experiences and Policy Issues," OUP Catalogue, Oxford University Press, number 9780195698206.
- Kohli, Renu, 2005. "Liberalizing Capital Flows: India's Experiences and Policy Issues," OUP Catalogue, Oxford University Press, number 9780195670578.
- Mohammed I Ansari & Ira N Gang, 1999. "Liberalization Policy: ‘Fits & Starts’ or Gradual Change in India," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 41(4), pages 23-46, December.
- Mohammed I. Ansari & Ira. N Gang, 1999. "Liberalization Policy: ‘Fits & Starts' Or Gradual Change In India," Departmental Working Papers 199907, Rutgers University, Department of Economics.
- Michael D. Bordo & Alan M. Taylor & Jeffrey G. Williamson, 2003. "Globalization in Historical Perspective," NBER Books, National Bureau of Economic Research, Inc, number bord03-1, November.
- Jagdish N. Bhagwati & T. N. Srinivasan, 1975. "Foreign Trade Regimes and Economic Development: India," NBER Books, National Bureau of Economic Research, Inc, number bhag75-1, November.
- Vuyyuri, S., 2004. "Linkages of Indian Interest Rates with US and Japanese Rates," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 4(2).
- Michael D. Bordo & Alan M. Taylor & Jeffrey G. Williamson, 2003. "Introduction to "Globalization in Historical Perspective"," NBER Chapters,in: Globalization in Historical Perspective, pages 1-10 National Bureau of Economic Research, Inc. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:izm:prcdng:200712. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ayla Ogus Binatli)
If references are entirely missing, you can add them using this form.