Exchange RAte Dynamics with Financial Repression: A Test of Exchange Rate Models for India

Abstract

This paper examines the relevance of the monetary approach for exchange rate behaviour in India, unde rthe managed float regime. It finds supprot for purchaisng power parity in traded goods and that the monetary approach provdies a reasonable description of exchange rate behaviour in the period of the float, given the deviation from integration of doemstic goods and assets markets from rest of the worldexchange rates; monetary model, purchasing power parity; managed floating; exchange rate policy; India