What Explains Real and Nominal Exchange Rate Fluctuations?: Evidence from SVAR Analysis for India

Takeshi Inoue and Shigeyuki Hamori

Economics Bulletin, 2009, vol. 29, issue 4, 2803-2815

Abstract: This study empirically analyzes the sources of the exchange rate fluctuations in India by employing the structural VAR model. The VAR system consists of three variables, i.e., the nominal exchange rate, the real exchange rate, and the relative output of India and a foreign country. Consistent with most previous studies, the empirical evidence demonstrates that real shocks are the main drives of the fluctuations in real and nominal exchange rates, indicating that the central bank cannot maintain the real exchange rate at its desired level over time.

Keywords: Exchange Rate; India; RBI; SVAR (search for similar items in EconPapers)
JEL-codes: F4 O1 (search for similar items in EconPapers)
Date: 2009-11-09
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Citations: View citations in EconPapers (5)

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Working Paper: What Explains Real and Nominal Exchange Rate Fluctuations? Evidence from SVAR Analysis for India (2009)
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