IDEAS home Printed from https://ideas.repec.org/h/izm/prcdng/200712.html
   My bibliography  Save this book chapter

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

Author

Listed:
  • Biru Paksha Paul

    (State University of New York at Binghamton)

Abstract

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.

Suggested Citation

  • Biru Paksha Paul, 2007. "Does Globalization Cause the Loss of Monetary-Policy Independence in Developing Economies? A Case Study with India," Papers of the Annual IUE-SUNY Cortland Conference in Economics,in: Proceedings of the Conference on Globalization and Its Discontents, pages 186-207 Izmir University of Economics.
  • Handle: RePEc:izm:prcdng:200712
    as

    Download full text from publisher

    File URL: http://eco.ieu.edu.tr/wp-content/proceedings/2007/0712.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Guillermo A. Calvo & Carmen M. Reinhart, 2002. "Fear of Floating," The Quarterly Journal of Economics, Oxford University Press, vol. 117(2), pages 379-408.
    2. 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.
    3. 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.
    4. Kohli, Renu, 2008. "Liberalizing Capital Flows: India's Experiences and Policy Issues," OUP Catalogue, Oxford University Press, number 9780195698206.
    5. 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.
    6. 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).
    7. 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.
    8. 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.
    Full references (including those not matched with items on IDEAS)

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. 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). General contact details of provider: http://edirc.repec.org/data/deieutr.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.