India's exchange rate regime under inflation targeting

Ashima Goyal

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

Abstract: While the basic exchange rate regime has stayed the same since the liberalizing reforms of the nineties, its implementation has varied over the years. The paper assesses the evolution of India's nominal exchange rate regime and its suitability under inflation targeting. It also examines the evolving impact on trade, inflation, on currency and financial markets, country risk premium and the cost of borrowing. The analysis suggests a flexible exchange rate with intervention to prevent excess volatility as well as misalignment from competitive real exchange rates, while allowing some volatility to aid price discovery in foreign exchange markets, would work best in inflation targeting emerging markets.

Keywords: India; exchange rate regime; capital flows; inflation targeting (search for similar items in EconPapers)
JEL-codes: E52 F31 F41 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2023-12
New Economics Papers: this item is included in nep-cba, nep-ifn, nep-mon and nep-opm
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Persistent link: https://EconPapers.repec.org/RePEc:ind:igiwpp:2023-015

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