Capital Flows and Central Banking
Because of the steady liberalization of the capital account since the early 1990s and increased financial integration of the Indian economy, capital flows to India have moved in tandem with broad global trends. This paper looks at the extent to which India’s monetary policy has been affected by the ebbs and flows of the capital it receives. For ease of narration, the paper divides the post-liberalization period since the early 1990s into three phases--early 1990s to early 2000s, a period of increasing but still modest capital flows; early 2000s to 2007-08, a period of capital flow surge when inflows increased rapidly; and a period of sudden stops and volatility, starting in 2008-09, when capital flows reversed in the post-Lehman Brothers collapse, and again during the tapering tantrum of 2013. The paper shows that although ordinarily domestic policy imperatives, such as price stability and growth, have taken precedence over issues related to exchange rate or capital flows in policy rate setting, some accommodation in money supply is evident during the surge and stop episodes. The broad policy mix to handle large increases or reversals of capital flows has included reserve management, liquidity management, and capital flow measures.
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Format: | Working Paper biblioteca |
Language: | English en_US |
Published: |
World Bank, Washington, DC
2016-02
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Subjects: | CAPITAL FLOWS, EMERGING MARKET ECONOMY, FINANCIAL INTEGRATION, FOREIGN EXCHANGE MARKET, GLOBAL ECONOMIC TRENDS, LIQUIDITY MANAGEMENT, POLICY RATE SETTING, |
Online Access: | http://documents.worldbank.org/curated/en/2016/02/25932613/capital-flows-central-banking-indian-experience https://hdl.handle.net/10986/23895 |
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dig-okr-10986238952024-08-07T20:04:08Z Capital Flows and Central Banking The Indian Experience Gupta, Poonam CAPITAL FLOWS EMERGING MARKET ECONOMY FINANCIAL INTEGRATION FOREIGN EXCHANGE MARKET GLOBAL ECONOMIC TRENDS LIQUIDITY MANAGEMENT POLICY RATE SETTING Because of the steady liberalization of the capital account since the early 1990s and increased financial integration of the Indian economy, capital flows to India have moved in tandem with broad global trends. This paper looks at the extent to which India’s monetary policy has been affected by the ebbs and flows of the capital it receives. For ease of narration, the paper divides the post-liberalization period since the early 1990s into three phases--early 1990s to early 2000s, a period of increasing but still modest capital flows; early 2000s to 2007-08, a period of capital flow surge when inflows increased rapidly; and a period of sudden stops and volatility, starting in 2008-09, when capital flows reversed in the post-Lehman Brothers collapse, and again during the tapering tantrum of 2013. The paper shows that although ordinarily domestic policy imperatives, such as price stability and growth, have taken precedence over issues related to exchange rate or capital flows in policy rate setting, some accommodation in money supply is evident during the surge and stop episodes. The broad policy mix to handle large increases or reversals of capital flows has included reserve management, liquidity management, and capital flow measures. 2016-03-09T18:00:55Z 2016-03-09T18:00:55Z 2016-02 Working Paper Document de travail Documento de trabajo http://documents.worldbank.org/curated/en/2016/02/25932613/capital-flows-central-banking-indian-experience https://hdl.handle.net/10986/23895 English en_US Policy Research Working Paper;No. 7569 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank application/pdf World Bank, Washington, DC |
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CAPITAL FLOWS EMERGING MARKET ECONOMY FINANCIAL INTEGRATION FOREIGN EXCHANGE MARKET GLOBAL ECONOMIC TRENDS LIQUIDITY MANAGEMENT POLICY RATE SETTING CAPITAL FLOWS EMERGING MARKET ECONOMY FINANCIAL INTEGRATION FOREIGN EXCHANGE MARKET GLOBAL ECONOMIC TRENDS LIQUIDITY MANAGEMENT POLICY RATE SETTING |
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CAPITAL FLOWS EMERGING MARKET ECONOMY FINANCIAL INTEGRATION FOREIGN EXCHANGE MARKET GLOBAL ECONOMIC TRENDS LIQUIDITY MANAGEMENT POLICY RATE SETTING CAPITAL FLOWS EMERGING MARKET ECONOMY FINANCIAL INTEGRATION FOREIGN EXCHANGE MARKET GLOBAL ECONOMIC TRENDS LIQUIDITY MANAGEMENT POLICY RATE SETTING Gupta, Poonam Capital Flows and Central Banking |
description |
Because of the steady liberalization of
the capital account since the early 1990s and increased
financial integration of the Indian economy, capital flows
to India have moved in tandem with broad global trends. This
paper looks at the extent to which India’s monetary policy
has been affected by the ebbs and flows of the capital it
receives. For ease of narration, the paper divides the
post-liberalization period since the early 1990s into three
phases--early 1990s to early 2000s, a period of increasing
but still modest capital flows; early 2000s to 2007-08, a
period of capital flow surge when inflows increased rapidly;
and a period of sudden stops and volatility, starting in
2008-09, when capital flows reversed in the post-Lehman
Brothers collapse, and again during the tapering tantrum of
2013. The paper shows that although ordinarily domestic
policy imperatives, such as price stability and growth, have
taken precedence over issues related to exchange rate or
capital flows in policy rate setting, some accommodation in
money supply is evident during the surge and stop episodes.
The broad policy mix to handle large increases or reversals
of capital flows has included reserve management, liquidity
management, and capital flow measures. |
format |
Working Paper |
topic_facet |
CAPITAL FLOWS EMERGING MARKET ECONOMY FINANCIAL INTEGRATION FOREIGN EXCHANGE MARKET GLOBAL ECONOMIC TRENDS LIQUIDITY MANAGEMENT POLICY RATE SETTING |
author |
Gupta, Poonam |
author_facet |
Gupta, Poonam |
author_sort |
Gupta, Poonam |
title |
Capital Flows and Central Banking |
title_short |
Capital Flows and Central Banking |
title_full |
Capital Flows and Central Banking |
title_fullStr |
Capital Flows and Central Banking |
title_full_unstemmed |
Capital Flows and Central Banking |
title_sort |
capital flows and central banking |
publisher |
World Bank, Washington, DC |
publishDate |
2016-02 |
url |
http://documents.worldbank.org/curated/en/2016/02/25932613/capital-flows-central-banking-indian-experience https://hdl.handle.net/10986/23895 |
work_keys_str_mv |
AT guptapoonam capitalflowsandcentralbanking AT guptapoonam theindianexperience |
_version_ |
1807155818428104704 |