Why India choked when Lehman broke

Ila Patnaik and Ajay Shah

Finance Working Papers from East Asian Bureau of Economic Research

Abstract: India has an elaborate system of capital controls which impede cap- ital mobility and particularly short-term debt. Yet, when the global money market fell into turmoil after the bankruptcy of Lehman Broth- ers on 13/14 September 2008, the Indian money market immediately experienced considerable stress, and the operating procedures of mon- etary policy broke down. We suggest that Indian multinationals were using the global money market and were short of dollars on 15 Septem- ber. They borrowed in India and took capital out of the country. We make three predictions that follow from this hypothesis, and _nd that the evidence matches these predictions. This suggests an important role for Indian multinationals in India's evolution towards de facto convertibility.

Keywords: capital controls; global nancial crisis; Indian multina- tionals; de facto convertibility (search for similar items in EconPapers)
JEL-codes: G01 G30 G33 (search for similar items in EconPapers)
Date: 2010-01
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Citations: View citations in EconPapers (7)

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Related works:
Journal Article: Why India Choked when Lehman Broke (2010)
Working Paper: Why India Choked when Lehman Broke (2010)
Working Paper: Why India choked when Lehman broke (2010)
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