Capital Flows and Their Macroeconomic Effects in India

Renu Kohli

No 2001/192, IMF Working Papers from International Monetary Fund

Abstract: This paper documents trends in movement and composition of capital flows into India in a comparative perspective, examines the impact of these flows upon key macroeconomic variables in the economy, and dwells on implications for economic policy. We find that an inflow of foreign capital results in a real appreciation and has a significant impact on domestic money supply. During a capital surge, these effects have been countered through intervention and sterilization. The paper concludes with a discussion on the costs of these policies in the event of a heavy inflow of foreign capital into India.

Keywords: WP; capital account; central bank; exchange rate appreciation; interest rate; Capital flows; real exchange rate; foreign exchange reserves; intervention; money supply; sterilization; capital controls; monetary management; capital mobility; exchange rate movement; capital surge; import-substituting pattern; public finance; world capital flow; portfolio capital flow; share price; Capital inflows; Real exchange rates; Monetary base; International reserves; Global; East Asia; Southeast Asia; Asia and Pacific (search for similar items in EconPapers)
Pages: 36
Date: 2001-12-01
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Citations: View citations in EconPapers (19)

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