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Capital controls and exchange rate regime: case study of India
Journal article   Peer reviewed

Capital controls and exchange rate regime: case study of India

Ramya Ghosh and Rajashi Ghosh
Macroeconomics and finance in emerging market economies, v 5(2)
01 Sep 2012

Abstract

capital control exchange rate
This paper focuses on India's exchange rate regime, capital controls and monetary policy. According to official classification, the exchange rate of the Indian rupee has been a 'managed float' since the 1990s. This paper presents a classification of India's exchange rate regime and also investigates whether changes in capital controls have had any influence on the exchange rate regime. The results reveal that the Indian rupee was de facto pegged to the US dollar between 2001 and 2003 but it has been moving toward greater flexibility in recent years. The analysis shows that there is indeed a link between changes in capital controls and the exchange rate regime. The paper also offers a discussion of India's monetary policy independence in the context of 'trilemma'.

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