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The Consequences of currency intervention in India

  • Ila Patnaik

    (Indian Council for Research on International Economic Relations)

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    Currency management in India has focused on delivering low levels of currency volatility. In earlier years, the implementation of the currency regime was enabled by the presence of capital controls. In recent years, India has made much progress towards capital account convertibility. This paper closely examines India's experience with the implementation of the currency regime in two episodes: 1993-95 and after 2002. We argue that the implementation of the existing currency regime now induces distorted monetary policy and fiscal costs. These costs of implementing the currency regime need to be factored into the choice of currency regime

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    File URL: http://www.icrier.org/pdf/wp114.pdf
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    Paper provided by Indian Council for Research on International Economic Relations, New Delhi, India in its series Indian Council for Research on International Economic Relations, New Delhi Working Papers with number 114.

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    Length: 31 pages
    Date of creation: Oct 2003
    Date of revision:
    Handle: RePEc:ind:icrier:114
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    1. Carmen M. Reinhart & Kenneth S. Rogoff, 2002. "The Modern History of Exchange Rate Arrangements: A Reinterpretation," NBER Working Papers 8963, National Bureau of Economic Research, Inc.
    2. Ila Patnaik, 2003. "India's policy stance on reserves and the currency," Indian Council for Research on International Economic Relations, New Delhi Working Papers 108, Indian Council for Research on International Economic Relations, New Delhi, India.
    3. Taimur Baig, 2001. "Characterizing Exchange Rate Regimes in Post-Crisis East Asia," IMF Working Papers 01/152, International Monetary Fund.
    4. Maurice Obstfeld & Kenneth Rogoff, 1995. "The mirage of fixed exchange rates," Working Papers in Applied Economic Theory 95-08, Federal Reserve Bank of San Francisco.
    5. Vijay Joshi, 2003. "India and the Impossible Trinity," The World Economy, Wiley Blackwell, vol. 26(4), pages 555-583, 04.
    6. Guillermo A. Calvo & Carmen M. Reinhart, 2002. "Fear Of Floating," The Quarterly Journal of Economics, MIT Press, vol. 117(2), pages 379-408, May.
    7. Guillermo A. Calvo, 1991. "The Perils of Sterilization," IMF Staff Papers, Palgrave Macmillan, vol. 38(4), pages 921-926, December.
    8. Leonardo Leiderman & Carmen Reinhart & Guillermo Calvo, 1992. "Capital Inflows and Real Exchange Rate Appreciation in Latin America; The Role of External Factors," IMF Working Papers 92/62, International Monetary Fund.
    9. Grilli, Vittorio U., 1986. "Buying and selling attacks on fixed exchange rate systems," Journal of International Economics, Elsevier, vol. 20(1-2), pages 143-156, February.
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