Capital Flows and Domestic Financial Sector in India

Renu Kohli ()

International Finance from EconWPA

Abstract: 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.

Keywords: capital flows; domestic financial sector; India; money supply; stock market; volatility; banking sector; capital account liberalisation; management of capital (search for similar items in EconPapers)
JEL-codes: F3 F4 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cwa, nep-ifn and nep-mfd
Date: 2004-05-08
Note: Type of Document - pdf; pages: 7
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpif:0405012

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