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Reading a Target Zone in Keynes's Indian Currency and Finance

By Gregor W. Smith

Abstract

The gold-exchange standard in India 1893-1913 was characterized by a narrow target zone for the exchange rate, a wide annual range for the international interest-rate differential, and negative (seasonal) autocorrelation in interest rates. These properties are consistent with a standard target-zone model in which fundamentals are negatively autocorrelated on a Markov chain.target zone, Indian currency question, gold exchange standard

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