Analysing India's exchange rate regime

Ila Patnaik and Rajeswari Sengupta

Indira Gandhi Institute of Development Research, Mumbai Working Papers from Indira Gandhi Institute of Development Research, Mumbai, India

Abstract: We analyse India's exchange rate regime through the prism of exchange market pressure. We estimate the various regimes that India's exchange rate has been through during the period from 2000 to 2020. We find four specific regimes of the Indian rupee differentiated by the degree of flexibility. We document the manner in which EMP in India has either been resisted through foreign exchange market intervention, or relieved through exchange rate change, across these four exchange rate regimes. We find that in only one of the four regimes the rupee-dollar exchange rate was relatively more flexible and the share of exchange rate in EMP absorption was the highest. This regime corresponded with the aftermath of the 2008 global crisis. In contrast, after 2013 the exchange rate was actively managed using spot as well as forward market intervention. We also find that the RBI has been intervening in the foreign exchange market in an asymmetric fashion to prevent the rupee from appreciating.

Keywords: Exchange rate regime; Forex intervention; Reserves; Exchange market pressure; Structural change (search for similar items in EconPapers)
JEL-codes: E58 F31 F41 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2021-08
New Economics Papers: this item is included in nep-cwa, nep-isf, nep-mac and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Analyzing India's Exchange Rate Regime (2022)
Working Paper: Analysing India's Exchange Rate Regime (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:ind:igiwpp:2021-022

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