Real Exhange Rate Stationarity in Managed Floats: Evidence From India

Renu Kohli ()

International Finance from University Library of Munich, Germany

Abstract: This paper tests for mean-reversion in real exchange rates for India during the recent (managed) float period yield evidence of mean- reversion in the real exchange rate series constructed with the consumer price index as deflator as well as for a series constructed using the ratio of wholesale and consumer price indices to proxy for the shares of tradable and non-tradable goods. An interesting finding is that there is no evidence for mean-reversion when the real exchange rate is computed with a broader base of currencies, suggesting exchange rate policy stabilisation effects vis-a-vis the US dollar. Another finding is that PPP fails to hold for the detrended relative prices of traded to non- traded goods, indicating possible presence of Balassa-Samuelson effect. The findings indicate the need for a model specifying real deterinants of the exchange rate to separate nominal disturbances from the real effects.

Keywords: real exchange rates; purchasing power parity; exchange rate policy; India; Balassa-Samuelson effect (search for similar items in EconPapers)
JEL-codes: F3 F4 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2004-05-09
New Economics Papers: this item is included in nep-cwa and nep-ifn
Note: Type of Document - pdf; pages: 32
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://econwpa.ub.uni-muenchen.de/econ-wp/if/papers/0405/0405014.pdf (application/pdf)

Related works:
Working Paper: Real Exchange Rate Stationarity in Managed Floats: Evidence from India (2004)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpif:0405014

Access Statistics for this paper

More papers in International Finance from University Library of Munich, Germany
Bibliographic data for series maintained by EconWPA ( this e-mail address is bad, please contact ).