ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Price Risk of Central Government Securities in India

The study examines the determinants of price risk of the central government securities in India using their daily trading data comprising of 81,384 observations during the period 2011 to 2020. The study finds that the high coupon bonds witness a moderate rise in prices compared to lower coupon...

Exchange Rate Management:Sense of Drift

The many challenges thrown up by the large inflow of foreign currency assets and the rapid build-up of foreign exchange reserves are not being faced frontally. Decisive actions on the exchange rate front will have major beneficial effects for the economy.

Exchange Rate Policy and Management

The objective of this study is to present the Indian experience of exchange rate management against the backdrop of international developments both at the theoretical and empirical levels. No single exchange rate regime is most appropriate for all countries and the regime that is appropriate for a particular country may change over time. The stated objective of India�s exchange rate policy is managing volatility with no fixed rate target while allowing the underlying demand and supply conditions to determine exchange rate movements over a period. Against this background, the empirical exercise undertaken indicates that monetary policy has been successful in ensuring orderly conditions in the foreign exchange market and containing the impact of exchange rate pass-through effect on domestic inflation. Real shocks are predominantly responsible for movements in real as well as nominal exchange rate; monetary policy shocks have been relatively unimportant. Deviations from uncovered interest parity can be observed suggesting role for sterilised foreign exchange market intervention in ensuring orderly conditions; at the same time, the excess returns are insignificant and get eliminated relatively quickly. Overall, the analysis indicates that exchange rate management in India has been consistent with macroeconomic stability.

Real Exchange Rate Stationarity in Managed Floats

The paper tests for mean-reversion in real exchange rates for India during the recent float period. Using unit root tests with improved power, we test for stationarity of the real exchange rate, using several definitions of the real exchange rate. We also conduct cointegration and variance ratio tests to complement the evidence from unit root tests. We find evidence of meanreversion 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.

Argentina and East Asia:The Peg Does It Yet Again

Notwithstanding some key differences, an important parallel between the east Asian crisis of 1997-98 and the recent turmoil in Argentina is the pivotal role played by the US dollar pegs in instigating the vulnerabilities which eventually led to the concerned countries succumbing to crisis. What is the appropriate lesson to draw from these experiences?

Asian Crisis Revisited

The East Asian Currency Crisis by Mihir Rakshit; Oxford University Press, Delhi, 2002; pp xii+288, Rs 545 .

Lessons from the Field

Foreign Exchange, International Finance and Risk Management by A V Rajwade; 3rd edition, Academy of Business Studies, New Delhi, April 2000; pp xvi + 542, Rs 440.
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