000			01680pab a2200205 454500
008			180718b2001 xxu||||| |||| 00| 0 eng d
100			_aPattanaik, Sitikantha
245			_aInterest rate defence of exchange rate: tale of the Indian rupee
260			_c2001
300			_ap.4418-428
362			_a24 Nov
520			_aWhile the rationale for raising the interest rate to defend an exchange rate under speculative attack is well grounded in economic and financial theories, empirical validation of the effectiveness of such a policy stance has generally been difficult and is shrouded with conflicting findings. In India, besides forex market interventions and use of several administrative measures, the Reserve Bank of India has occasionally resorted to the high interest rate option during major episodes of significant pressures on the external value of the rupee. An empirical assessment suggests that one standard deviation shock to the call rate leads to rupee appreciation in the very second month. Similarly, for one standard deviation shock to net interventions, the exchange rate appreciates gradually by a few paise over five months. The impulse response also suggests that in response to one standard deviation shock the exchange rate appreciates by about 8 paise in the second month, but subsequently the exchange rate depreciates gradually, more than offsetting the initial impact of the hike in interest rate. - Reproduced
650			_aMoney - India
650			_aExchange rates - India
650			_aInterest rates - India
650			_aInterest rates
700			_aMitra, Arghya Kusum
773			_aEconomic and Political Weekly
909			_a50710
999			_c50710 _d50710