Econometrics of Exchange Rate

Conflict between economic interests of two or more countries can take place in the inflation prone floating exchange regime and thus affect monetary policies of each other. This paper tries to examine whether the exchange rates of the currencies of the industrial countries are affecting India’s currency and making the Reserve Bank of India (RBI) intervene in the foreign exchange market. It is found that limitation of RBI data is a major factor constraining the progress of research on the above kind of conflict, unless RBI publishes details of its foreign exchange operations in terms of net assets in individual foreign currencies, it would be difficult to ascertain the impact, if any, of monetary policies of US and EMS on the monetary policy of RBI.