Globalization And Monetary-policy Independence In India

Biru Paksha Paul ()
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Biru Paksha Paul: State University of New York at Cortland, USA

Journal of Developing Areas, 2012, vol. 46, issue 2, 205-211

Abstract: Globalization of the early 1990s is thought to have caused the loss of monetary-policy independence in India. I find that India's monetary-policy independence is anchored in the exchange-rate regime along with its state of foreign-exchange reserves, and not necessarily in globalization per se. India significantly followed US interest rates even in the absence of globalization in the 1960s when the country faced foreign-exchange constraints and maintained a fixed exchange rate. From the mid 1970s to the early 1990s, India exercised monetary-policy independence under a floating exchange-rate regime. The loss of monetary-policy independence since the early 1990s is not attributable to globalization per se, but mainly to the stable exchange-rate policy of India, which heavily resembles the policy of the 1960s.

Keywords: Globalization; monetary-policy independence; exchange-rate regimes (search for similar items in EconPapers)
JEL-codes: E52 E58 F41 (search for similar items in EconPapers)
Date: 2012
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