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Capital Flows and Domestic Financial Sector in India

  • Renu Kohli

    (Reserve Bank of India)

This paper examines the impact of capital flows on the domestic financial sector in India. Inflow of foreign capital, it is found, has a significant impact on domestic money supply and stock market growth, liquidity and volatility. The banking sector, however, remains relatively insulated due to the policy responses of the central bank and barriers to direct capital inflows into the banking system. The paper concludes with a discussion of the costs of these policies in the event of a heavy inflow of foreign capital.

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File URL: http://econwpa.repec.org/eps/if/papers/0405/0405012.pdf
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Paper provided by EconWPA in its series International Finance with number 0405012.

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Length: 7 pages
Date of creation: 08 May 2004
Date of revision:
Handle: RePEc:wpa:wuwpif:0405012
Note: Type of Document - pdf; pages: 7
Contact details of provider: Web page: http://econwpa.repec.org

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  1. Chuhan, Punam & Claessens, Stijn & Mamingi, Nlandu, 1998. "Equity and bond flows to Latin America and Asia: the role of global and country factors," Journal of Development Economics, Elsevier, vol. 55(2), pages 439-463, April.
  2. Henry, Peter Blair, 2000. "Do stock market liberalizations cause investment booms?," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 301-334.
  3. Carmen Reinhart & Mohsin S. Khan, 1995. "Capital Flows in the APEC Region," IMF Occasional Papers 122, International Monetary Fund.
  4. 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.
  5. Levine, Ross & Zervos, Sara, 1998. "Stock Markets, Banks, and Economic Growth," American Economic Review, American Economic Association, vol. 88(3), pages 537-58, June.
  6. Renu Kohli & Kenneth Kletzer, 2001. "Financial Repression and Exchange Rate Management in Developing Countries; Theory and Empirical Evidence for India," IMF Working Papers 01/103, International Monetary Fund.
  7. Linda M. Koenig, 1996. "Capital Inflows and Policy Responses in the AsEAN Region," IMF Working Papers 96/25, International Monetary Fund.
  8. Claessens, Stijn & Dooley, Michael P & Warner, Andrew, 1995. "Portfolio Capital Flows: Hot or Cold?," World Bank Economic Review, World Bank Group, vol. 9(1), pages 153-74, January.
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