Indiaâ€™s Experience in Navigating the Trilemma : Do Capital Controls Help?
Managing capital flows is the key policy challenge for emerging economies like India in the aftermath of the crisis. In contrast to other emerging markets who are levying capital controls, Indiaâ€˜s macro-monetary framework is distinguished by significant restrictions that help manage inflows. Against this context, the paper characterizes Indiaâ€˜s capital account management strategy through illustrating the 2006-07 episodes of capital inflows in the buildup to the global financial crisis. It shows how these restrictions allowed the authorities to straddle the open-economy trilemma and balance the exchange rate and price stability objectives. It offers relevant evidence on the effectiveness of Indiaâ€˜s capital controls in retaining monetary autonomy.
|Date of creation:||Feb 2012|
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