Capital Flows and Central Banking : The Indian Experience

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 whi...

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Main Author:	Gupta, Poonam
Format:	Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2016
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 http://hdl.handle.net/10986/23895

id	okr-10986-23895
recordtype	oai_dc
spelling	okr-10986-238952021-04-23T14:04:18Z 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 http://documents.worldbank.org/curated/en/2016/02/25932613/capital-flows-central-banking-indian-experience http://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 World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper South Asia India
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English en_US
topic	CAPITAL FLOWS EMERGING MARKET ECONOMY FINANCIAL INTEGRATION FOREIGN EXCHANGE MARKET GLOBAL ECONOMIC TRENDS LIQUIDITY MANAGEMENT POLICY RATE SETTING
spellingShingle	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 : The Indian Experience
geographic_facet	South Asia India
relation	Policy Research Working Paper;No. 7569
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
author	Gupta, Poonam
author_facet	Gupta, Poonam
author_sort	Gupta, Poonam
title	Capital Flows and Central Banking : The Indian Experience
title_short	Capital Flows and Central Banking : The Indian Experience
title_full	Capital Flows and Central Banking : The Indian Experience
title_fullStr	Capital Flows and Central Banking : The Indian Experience
title_full_unstemmed	Capital Flows and Central Banking : The Indian Experience
title_sort	capital flows and central banking : the indian experience
publisher	World Bank, Washington, DC
publishDate	2016
url	http://documents.worldbank.org/curated/en/2016/02/25932613/capital-flows-central-banking-indian-experience http://hdl.handle.net/10986/23895
_version_	1764455088531701760

Capital Flows and Central Banking : The Indian Experience

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