CURRENCY MISALIGNMENT AND EXCHANGE RATES

Introduction

Currency misalignment refers to exchange rates deviating from

economic fundamentals

Important for trade competitiveness, economic growth

China seen as example of misaligned currency due to controlled

exchange rate policy

This study examines currency misalignment in India, China, and USA

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Exchange Rate Systems

India has managed floating exchange rate system

China had fixed rate till 1993, then pegged rate, more flexibility

since 2015

USA has floating exchange rate determined by market forces

Determinants of Exchange Rates

Long run factors: Trade flows, price levels, productivity

Short run factors: Interest rates, inflation, economic growth

Methodology

Examines impact of GDP growth, interest rate, inflation, current

account balance on exchange rate

Uses fixed effects model with country dummies

Quarterly data from 2000-2020

Results

In India, GDP and inflation significant; interest rate and CA balance

insignificant

In China and USA, all four fundamentals insignificant

Movements deviate from theoretical relationships

Conclusion

Empirical analysis shows exchange rates do not follow fundamentals

Presence of currency misalignment in all three countries

Suggests artificial interventions are distorting exchange rate

determination

Long-run misalignment does not correct itself

Key Points

Currency misalignment when exchange rate deviates from

fundamentals

India has managed float; China pegged rate; USA floating rate

GDP, inflation significant for India; all insignificant for China, USA

Movements inconsistent with theory

Indicates currency misalignment and artificial distortions

Misalignment persists over long run

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