What Caused the 1991 Currency Crisis in India?
IMF Working Papers, October 1, 2000
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- What Caused the 1991 Currency Crisis in India?
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Bibliographic details
- Authors: Sweta Chaman Saxena, Valerie Cerra
- Published: October 1, 2000
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451857481.001
Summary and main findings
- The paper asks: Did real overvaluation contribute to the 1991 currency crisis in India?
- Results are affirmative that real overvaluation contributed to the crisis.
- Evidence indicates that current account deficits and investor confidence also played significant roles in the sharp exchange rate depreciation.
- The Error Correction Model (ECM) constructed to estimate the equilibrium real exchange rate is supported by superior out-of-sample forecast performance versus a random walk model.
Methodology
- The equilibrium real exchange rate is constructed using an error correction model (ECM).
- The paper applies a technique developed by Gonzalo and Granger (1995).
Subject areas and keywords (as listed)
- Subject: Balance of payments, Current account, Current account deficits, Exchange rates, Foreign exchange, Real effective exchange rates, Real exchange rates
- Keywords: Currency Crisis, Current account, Current account deficits, equilibrium exchange rate, Error Correction Model, exchange rate, exchange rate depreciation, exchange rate misalignment, Exchange rates, Gonzalo-Granger decomposition, India, Indian rupee, Middle East, price level, Real effective exchange rates, Real exchange rates, terms of trade, widening current account imbalance, WP
Content in this bundle
- What Caused the 1991 Currency Crisis in India? - WP/00/157