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The Difficulties of the Chinese and Indian Exchange Rate Regimes

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  • Ajay Shah
  • Ila Patnaik

Abstract

China and India have both attempted distorting the exchange rate in order to foster exports-led growth. This is described as the Bretton Woods II framework, where developing countries buy bonds in the US and keep undervalued exchange rates, in order to foster export-led growth. The costs and benefits of this approach need to factor in the extent to which monetary policy is distorted by the pursuit of exchange rate policy. In this paper, dates of structural change are identified, and the characteristics of the de facto exchange rate regime, for both countries are examined. These results utilise recent developments in the econometrics of structural change. Business cycle conditions and the short-term rate (expressed in real terms) in both India and China are also examined. [NIPFP WP No 2009-62].

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  • Ajay Shah & Ila Patnaik, 2009. "The Difficulties of the Chinese and Indian Exchange Rate Regimes," Working Papers id:2321, eSocialSciences.
  • Handle: RePEc:ess:wpaper:id:2321
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    Cited by:

    1. Prasad Bal, Debi & Narayan Rath, Badri, 2015. "Nonlinear causality between crude oil price and exchange rate: A comparative study of China and India," Energy Economics, Elsevier, vol. 51(C), pages 149-156.
    2. Utso Pal Mustafi & Rajeswari Sengupta, 2020. "Regime changes in Indias monetary policy and Tenures of RBI governors," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2020-011, Indira Gandhi Institute of Development Research, Mumbai, India.
    3. Shirai, Sayuri, 2009. "世界経済危機とグローバル・マネーの変動 ―国際経済秩序へのインプリケーションー [Global Economic Crisis and Movements of Cross-Border Capital Flows ―Implication to the Global Economic Order―]," MPRA Paper 18619, University Library of Munich, Germany.
    4. Heshmati, Almas & Kumbhakar, Subal C., 2010. "Technical Change and Total Factor Productivity Growth: The Case of Chinese Provinces," IZA Discussion Papers 4784, Institute of Labor Economics (IZA).
    5. Ila Patnaik & Ajay Shah, 2012. "Asia Confronts the Impossible Trinity," Chapters, in: Masahiro Kawai & Peter J. Morgan & Shinji Takagi (ed.), Monetary and Currency Policy Management in Asia, chapter 7, Edward Elgar Publishing.
    6. Ila Patnaik & Rajeswari Sengupta, 2021. "Analysing India's exchange rate regime," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2021-022, Indira Gandhi Institute of Development Research, Mumbai, India.
    7. Enrico Marelli & Marcello Signorelli, 2011. "China and India: Openness, Trade and Effects on Economic Growth," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 8(1), pages 129-154, June.
    8. Rajan Ramkishen S & Gopalan Sasidaran, 2010. "India's International Reserves: How Large and How Diversified?," Global Economy Journal, De Gruyter, vol. 10(3), pages 1-18, October.
    9. Ila Patnaik & Ajay Shah, 2012. "Did the Indian Capital Controls Work as a Tool of Macroeconomic Policy?," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 60(3), pages 439-464, September.

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    More about this item

    Keywords

    GDP; RBI; indian; exports; china; India; exchange rte; bretton woods; US; monetary policy; developing countries; de facto; business cycle;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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