Exchange rate management in India: an empirical evaluation
- 1998
- p.185-214
- Sep
Drawing from a strand in the literature, this paper develops objective indicators i.e., indices of exchange market pressure, intervention activity and monetary conditions in order to assess the efficacy, in terms of both timing and magnitude, of policy measures in assuaging exchange market pressures. The theoretical underpinning for the indices are drawn from a simple monetary model of exchange rate determination. This indices are found to perform well in tracking exchange market activity and policy action has been successful in relieving exchange market pressure. Simplicity in the computation of these indices and their superiority in terms of quick availability, in encompassing overall developments in the balance of payments and in reflecting market activity recommends their use for operational purposes. - Reproduced