IDEAS home Printed from https://ideas.repec.org/p/ind/igiwpp/2019-030.html
   My bibliography  Save this paper

How far is the Indian nominal exchange rate from equilibrium?

Author

Listed:
  • Ashima Goyal

    (Indira Gandhi Institute of Development Research)

  • Krittika Banerjee

    (Indira Gandhi Institute of Development Research)

Abstract

Examining misalignments from equilibrium exchange rates for eight key emerging markets does not find evidence of systemic overvaluation. Swings associated with global events suggest changes are driven more by surges in global capital. The Indian equilibrium nominal rate depreciated since 2012 despite real appreciation but the range of 68-71 for INR/USD was close to equilibrium in 2018.

Suggested Citation

  • Ashima Goyal & Krittika Banerjee, 2019. "How far is the Indian nominal exchange rate from equilibrium?," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2019-030, Indira Gandhi Institute of Development Research, Mumbai, India.
    • Handle: RePEc:ind:igiwpp:2019-030
    as

    Download full text from publisher

    File URL: http://www.igidr.ac.in/pdf/publication/WP-2019-030.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Raju Huidrom & M. Ayhan Kose & Hideaki Matsuoka & Franziska L. Ohnsorge, 2020. "How important are spillovers from major emerging markets?," International Finance, Wiley Blackwell, vol. 23(1), pages 47-63, March.
    2. Michael P. Dooley & David Folkerts-Landau & Peter Garber, 2007. "Direct Investment, Rising Real Wages and the Absorption of Excess Labor in the Periphery," NBER Chapters, in: G7 Current Account Imbalances: Sustainability and Adjustment, pages 103-132, National Bureau of Economic Research, Inc.
    3. Ashima Goyal, 2018. "Evaluating India’s exchange rate regime under global shocks," Macroeconomics and Finance in Emerging Market Economies, Taylor & Francis Journals, vol. 11(3), pages 304-321, September.
    4. Olivier Blanchard & Gian Maria Milesi-Ferretti, 2012. "(Why) Should Current Account Balances Be Reduced?," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 60(1), pages 139-150, April.
    5. Helene Rey, 2013. "Dilemma not trilemma: the global cycle and monetary policy independence," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 1-2.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Acharya, Sushant & Bengui, Julien, 2018. "Liquidity traps, capital flows," Journal of International Economics, Elsevier, vol. 114(C), pages 276-298.
    2. Jamel Saadaoui, 2015. "Does financial openness explain the increase of global imbalances before the crisis of 2008?," International Economics, CEPII research center, issue 143, pages 23-35.
    3. Saadaoui, Jamel, 2012. "Déséquilibres globaux, taux de change d’équilibre et modélisation stock-flux cohérente [Global Imbalances, Equilibrium Exchange Rates and Stock-Flow Consistent Modelling]," MPRA Paper 51332, University Library of Munich, Germany.
    4. Steinherr, Alfred & Cisotta, Alessandro & Klar, Erik & Sehovic, Kenan, 2006. "Liberalizing Cross-Border Capital Flows: How Effective Are Institutional Arrangements against Crisis in Southeast Asia," Working Papers on Regional Economic Integration 6, Asian Development Bank.
    5. Saadaoui, Jamel, 2012. "Global Imbalances: Should We Use Fundamental Equilibrium Exchange Rates?," MPRA Paper 42554, University Library of Munich, Germany.
    6. Moral-Benito, Enrique & Roehn, Oliver, 2016. "The impact of financial regulation on current account balances," European Economic Review, Elsevier, vol. 81(C), pages 148-166.
    7. McNelis, Paul D., 2016. "Optimal policy rules at home, crisis and quantitative easing abroad," BOFIT Discussion Papers 15/2016, Bank of Finland, Institute for Economies in Transition.
    8. Maria V. Sokolova, 2016. "Trade Re(Im)Balanced: The Role of Regional Trade Agreements," IHEID Working Papers 06-2016, Economics Section, The Graduate Institute of International Studies.
    9. Dedola, Luca & Rivolta, Giulia & Stracca, Livio, 2017. "If the Fed sneezes, who catches a cold?," Journal of International Economics, Elsevier, vol. 108(S1), pages 23-41.
    10. Monacelli, Tommaso & Sala, Luca & Siena, Daniele, 2023. "Real interest rates and productivity in small open economies," Journal of International Economics, Elsevier, vol. 142(C).
    11. Cesa-Bianchi, Ambrogio & Eguren Martin, Fernando & Thwaites, Gregory, 2019. "Foreign booms, domestic busts: The global dimension of banking crises," Journal of Financial Intermediation, Elsevier, vol. 37(C), pages 58-74.
    12. Faruqee, Hamid & Laxton, Douglas & Muir, Dirk & Pesenti, Paolo, 2008. "Would protectionism defuse global imbalances and spur economic activity? A scenario analysis," Journal of Economic Dynamics and Control, Elsevier, vol. 32(8), pages 2651-2689, August.
    13. Chen, Sophia & Ranciere, Romain, 2019. "Financial information and macroeconomic forecasts," International Journal of Forecasting, Elsevier, vol. 35(3), pages 1160-1174.
    14. Dang, Tam Hoang Nhat & Balli, Faruk & Balli, Hatice Ozer & Gabauer, David & Nguyen, Thi Thu Ha, 2024. "Sectoral uncertainty spillovers in emerging markets: A quantile time–frequency connectedness approach," International Review of Economics & Finance, Elsevier, vol. 93(PB), pages 121-139.
    15. Dan Costin NIŢESCU & Florin Alexandru DUNĂ & Adriana Daniela CIUREL, 2020. "Banking sector and bank liquidity – key actors within financial crises?," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(2(623), S), pages 147-168, Summer.
    16. Kuersteiner, Guido M. & Phillips, David C. & Villamizar-Villegas, Mauricio, 2018. "Effective sterilized foreign exchange intervention? Evidence from a rule-based policy," Journal of International Economics, Elsevier, vol. 113(C), pages 118-138.
    17. Hoffmann, Andreas & Schnabl, Gunther, 2016. "Monetary policies of industrial countries, emerging market credit cycles and feedback effects," Journal of Policy Modeling, Elsevier, vol. 38(5), pages 855-873.
    18. Lakdawala, Aeimit & Moreland, Timothy & Schaffer, Matthew, 2021. "The international spillover effects of US monetary policy uncertainty," Journal of International Economics, Elsevier, vol. 133(C).
    19. Antoine Bouveret & Sana Mestiri & Henri Sterdyniak, 2006. "The Renminbi Equilibrium Exchange Rate: an agnostic view," SciencePo Working papers Main hal-01073825, HAL.
    20. Asger Lau Andersen & Niels Johannesen & Mia Jørgensen & José-Luis Peydró, 2020. "Monetary policy and inequality," Economics Working Papers 1761, Department of Economics and Business, Universitat Pompeu Fabra, revised Mar 2021.

    More about this item

    Keywords

    Nominal exchange rate; Misalignments; India; Emerging market economies;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    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:ind:igiwpp:2019-030. See general information about how to correct material in RePEc.

    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 bibliographic 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Shamprasad M. Pujar (email available below). General contact details of provider: https://edirc.repec.org/data/igidrin.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.