International Journal of Business and Economics Volume 14, No. 2 December, 2015

Capital Flow Components and the Real Exchange Rate : Implications for India

Shashank Goel

Indian Institute of Foreign Trade, India

V. Raveendra Saradhi

Indian Institute of Foreign Trade, India

Abstract

This paper analyzes the relationship between the net capital flow components and the real exchange rate in India for the period 1996–1997 to 2012–2013 . The empirical results suggest that there is a strong case for further liberalization of foreign direct investment flows, while greater caution is need in liberalization of portfolio and debt creating flows.

Keywords：debt creating flows, foreign direct investment, foreign exchange reserves, foreign portfolio flows, government consumption expenditure, real exchange rate.

JEL Classifications： F30, F36, F40, F62, F65.

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