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Foreign Exchange Intervention Under the Integrated Policy Framework: The Case of India

Author

Listed:
  • Jesper Lindé
  • Mr. Patrick Schneider
  • Mrs. Nujin Suphaphiphat
  • Hou Wang

Abstract

This paper analyzes the effectiveness of foreign exchange intervention (FXI) in mitigating economic and financial shocks in India by applying the Integrated Policy Framework (IPF). It highlights how FXI can be a complementary tool in mitigating the tradeoff between output and inflation, specifically under large economic shocks amid temporarily shallow FX markets. The paper indicates that while FXI can soften adverse impacts on domestic demand and output during severe risk-off shocks, its benefits under normal conditions with liquid FX markets are limited.

Suggested Citation

  • Jesper Lindé & Mr. Patrick Schneider & Mrs. Nujin Suphaphiphat & Hou Wang, 2024. "Foreign Exchange Intervention Under the Integrated Policy Framework: The Case of India," IMF Working Papers 2024/236, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2024/236
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