Capital account liberalisation in India: Volatility of capital flows and selective policy issues
Shivangi Jaiswal and
Dr. N. Kubendran
Additional contact information
Shivangi Jaiswal: NMIMS University, Bangalore, India
Dr. N. Kubendran: NMIMS University Bangalore, India
Theoretical and Applied Economics, 2021, vol. XXVIII, issue 1(626), Spring, 201-218
This paper attempts to investigate the relationship between capital account openness and occurrence of financial risks in India by employing finite distributed lag model. Annual data from 1979 to 2018 on real effective exchange rate, real interest rate, international reserve and net capital have been used to compute Exchange Market Pressure index and the degree of capital account liberalization. The study finds that opening up of capital account will have harmful effects on the financial stability of the country in the initial years, say a year or two. However, the degree of financial risks will go down in later years by influencing capital inflows. Finally, the study has suggested that the Reserve Bank of India needs to take precautionary measures to mitigate short term volatility of capital flows before choosing fuller capital account convertibility.
Keywords: capital account liberalization; financial stability; real exchange rate; real interest rate; foreign exchange reserve; finite distributed lag model. (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:agr:journl:v:1(626):y:2021:i:1(626):p:201-218
Access Statistics for this article
Theoretical and Applied Economics is currently edited by Marin Dinu
More articles in Theoretical and Applied Economics from Asociatia Generala a Economistilor din Romania - AGER Contact information at EDIRC.
Bibliographic data for series maintained by Marin Dinu ().