Why India choked when Lehman broke
Ila Patnaik () and
Finance Working Papers from East Asian Bureau of Economic Research
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)
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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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