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dc.contributor.authorHutchison, Michael M.en_US
dc.contributor.authorSengupta, Rajeswarien_US
dc.contributor.authorSingh, Nirvikaren_US
dc.date.accessioned2010-11-16en_US
dc.date.accessioned2012-09-21T11:54:06Z-
dc.date.available2012-09-21T11:54:06Z-
dc.date.issued2010en_US
dc.identifier.urihttp://hdl.handle.net/10419/64045-
dc.description.abstractA key challenge for macroeconomic policy in open economies is how to simultaneously manage exchange rates, interest rates and capital account openness - the trilemma. This paper calculates a trilemma index for India and investigates its evolution over time. We find that financial integration has increased markedly after the mid-2000s, with corresponding limitations on monetary independence and exchange rate stability. This tradeoff has been mitigated, however, with the rise of international reserves as a partially independent instrument of macroeconomic policy. In addition, we confirm that the weighted sum of the three indexes adds up to a constant, validating the notion that a rise in one trilemma variable should be traded-off with a drop of the weighted sum of the other two. Finally, we consider the implications of changes in the trilemma index for macroeconomic outcomes. We find some evidence that greater financial integration and corresponding loss of monetary autonomy and exchange rate stability has influenced inflation and inflation volatility, though not in a consistent manner.en_US
dc.language.isoengen_US
dc.publisherSanta Cruz Inst. for International Economics Santa Cruz, Calif.en_US
dc.relation.ispartofseriesWorking Papers, Santa Cruz Institute for International Economics 10-09en_US
dc.subject.jelE4en_US
dc.subject.jelE5en_US
dc.subject.jelF3en_US
dc.subject.jelF4en_US
dc.subject.ddc330en_US
dc.subject.keywordFinancial trilemmaen_US
dc.subject.keywordIndian economyen_US
dc.subject.keywordInternational reservesen_US
dc.subject.keywordForeign exchange interventionen_US
dc.subject.keywordMonetary policyen_US
dc.subject.keywordCapital account opening.en_US
dc.titleIndia's trilemma: Financial liberalization, exchange rates and monetary policyen_US
dc.typeWorking Paperen_US
dc.identifier.ppn639616372en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen_US
Appears in Collections:Working Papers, Santa Cruz Institute for International Economics, UC Santa Cruz

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