Capital Flows and Their Macroeconomic Effects in India

December 1, 2001

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Renu Kohli. Capital Flows and Their Macroeconomic Effects in India, (USA: International Monetary Fund, 2001) accessed December 26, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper documents trends in movement and composition of capital flows into India in a comparative perspective, examines the impact of these flows upon key macroeconomic variables in the economy, and dwells on implications for economic policy. We find that an inflow of foreign capital results in a real appreciation and has a significant impact on domestic money supply. During a capital surge, these effects have been countered through intervention and sterilization. The paper concludes with a discussion on the costs of these policies in the event of a heavy inflow of foreign capital into India.

Subject: Balance of payments, Capital flows, Capital inflows, Central banks, Foreign exchange, International reserves, Monetary base, Money, Real exchange rates

Keywords: Asia and Pacific, Capital account, Capital controls, Capital flows, Capital inflows, Capital mobility, Capital surge, Central bank, East Asia, Exchange rate appreciation, Exchange rate movement, Foreign exchange reserves, Global, Import-substituting pattern, Interest rate, International reserves, Intervention, Monetary base, Monetary management, Money supply, Portfolio capital flow, Public finance, Real exchange rate, Real exchange rates, Share price, Southeast Asia, Sterilization, World capital flow, WP

Publication Details

Pages:

36
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2001/192
Stock No:

WPIEA1922001
ISBN:

9781451859768
ISSN:

1018-5941

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