Policy tradeoffs in an open economy and the role of G-20 in global macroeconomic policy coordination

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dc.contributor.author Sengupta, Rajeswari
dc.contributor.author Sen Gupta, Abhijit
dc.date.accessioned 2015-12-04T10:26:41Z
dc.date.available 2015-12-04T10:26:41Z
dc.date.issued 2015-08
dc.identifier.uri http://hdl.handle.net/2275/372
dc.description.abstract In this paper we investigate the different nuances of India's capital account management through empirical analyses as well as descriptive discussions. In particular we study the evolution of the capital control regime in India since 1991, and explore the rationale behind liberalizing certain flows, restricting others and the means employed to do so. Increased integration with global financial markets has amplified the complexity of macroeconomic management in India. We analyze the trade-offs faced by Indian policy makers between exchange rate stability, monetary autonomy and capital account openness, within the framework of the well-known Impossible Trinity or Trilemma and find that over time India has adopted an intermediate regime balancing the different policy objectives while at the same time accumulating massive international reserves. We also calculate the exchange market pressure (EMP) index in India, and track its evolution over the last couple of decades. We evaluate the extent to which the EMP index has been influenced by major macroeconomic factors and find that a deteriorating trade balance and decline in portfolio equity inflows are associated with a higher EMP while positive changes in stock market returns lower the EMP. en_US
dc.language.iso en en_US
dc.relation.ispartofseries WP;WP-2015-024
dc.subject Capital controls en_US
dc.subject Macroeconomic trilemma en_US
dc.subject Financial integration en_US
dc.subject Foreign exchange intervention en_US
dc.subject Sterilization en_US
dc.subject Exchange market pressure en_US
dc.subject Reserve adequacy en_US
dc.title Policy tradeoffs in an open economy and the role of G-20 in global macroeconomic policy coordination en_US
dc.type Working Paper en_US

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