ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

Indrani ChakrabortySubscribe to Indrani Chakraborty

Capital Inflows during the Post-Liberalisation Period

This paper examines the time series properties of foreign capital inflows into India in the 1990s, particularly in the period that followed certain liberalisation measures in the financial sector. An analysis of the quarterly data for the period 1993 to 2003 shows that net capital inflows have been volatile, though not all components of aggregate inflows have moved in a similar fashion. The paper further analyses how capital inflows adjusted to changes in the real exchange rate and other macroeconomic variables in India since 1993. The econometric results indicate that an error-correction mechanism was operating between net inflows of capital and the real exchange rate. Macroeconomic fundamentals did not have any significant effect on the dynamic adjustment of capital inflows, and a co-integration relationship exists between the net inflows of capital, real exchange rate and interest rate differential. It is argued that co-movement in these variables was due to the intervention of the Reserve Bank of India in the foreign exchange market, which helped prevent the volatility of the real exchange rate in spite of this volatility in net inflows of capital.

Teaching Economic History

A recent workshop on teaching economic history threw up several dimensions which promise to reorient the thinking of teachers and scholars of the discipline of economic history.
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