Real Exchange Rate Stabilisation And Managed Floating: Exchange Rate Policy In
Real Exchange Rate Stabilisation and Managed Floating: Exchange Rate Policy in
India, 1993-99
Renu Kohli*
The paper examines the exchange rate management strategy of the Indian central bank after the shift to a
floating exchange rate regime in 1993. A policy reaction function tests for its intervention behaviour and
finds significant effort to lean against the wind during 1993-99. This is tempered with purchasing power
parity considerations as evidenced by the central bank's response to deviations of the spot rate from
moving relative prices' target. This indicates a real exchange rate stabilisation policy by the Indian
authorities.
Keywords: Exchange rate; intervention; exchange rate management; purchasing power
parity; real exchange rate; managed floating; exchange rate target;
JEL Classification Nos. E 58, F3, F31
*
The author is employed by the Reserve Bank of India and currently on deputation......
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Approximate Word Count: 1256
Approximate Pages: 6 (250 words per double-spaced page)
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