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Thesis代寫Liquidity and Exchange Rate Management

發布于2020-09-22 作者:留學寫作網 閱讀:
Liquidity and Exchange Rate Management (2007-08)

北美代写,论文Essay代写,网课代修,Exam代考 The predominant issue that continues to confront the RBI in 2007-08 has been the steady increase of forex flows. These large and volatile inflows have resulted in rapid appreciation of rupee—almost by 12% against the dollar along with high interest rate in the economy.

北美代写,论文Essay代写,网课代修,Exam代考 1. The first phase of rupee appreciation--due to RBI stepping back from market: Active intervention by RBI in the forex market prevented the rupee from strengthening fully in response to the dollar global weakness. Indeed, increase in foreign currency reserves by USD 86 bn between 2004 to March 2007 indicates the scale of intervention. However the obvious consequence of this was an increase in money supply and inflation. Inflation as measured by WPI ran as high as 6-6.8% from January to April 2007 while M3 continued to hover above RBI’s comfort zone. Concerns over rising inflation ultimately forced RBI to step away from the forex market in April 2007. As a result rupee appreciated at a rapid pace between April and May approximately by 10%. Besides impacting the pace of appreciation, the decision to step away from the market led to change in expectation for rupee. The market expected the currency to move in only in one direction namely appreciate, appreciate and appreciate.

Was RBI’s decision to step away from the market correct? I think the decision need to be viewed in the backdrop of high inflation rates prevailing in the beginning of the year. While a stronger rupee can have a negative impact on export growth, but a sustained up move in inflation could have triggered an increase in inputs costs for exports and would have ultimately made the exports non competitive despite a stable exchange rate. Though it cannot be contested that if RBI had allowed appreciation on a gradual basis over a period of time instead of side stepping for a complete month, the pain would have been much less. This would have enabled companies to adjust their costing and expectations on a continuous basis, rather than having to deal with it in one fell swoop.

北美代写,论文Essay代写,网课代修,Exam代考 Perhaps this is a classical “Dutch Disease” situation where non-tradeables become over-priced and erode the competitiveness of the economy in the tradeable sector. Which emphasize the “need” to restrain these capital flows and enhanced the absorptive capacity in the economy.

However to summarize, the first phase of appreciation was caused by RBI’s action or to say inaction in the forex market-- an exogenous factor rather than a market force say increase in inflows.

2. The second phase of rupee appreciation: Rupee was once again under strong appreciation pressure as Fed cut it’s rate by half-percentage point to 4.75% on Sept 18, 2007, followed by a quarter percentage point cut to 4.5% on Oct 31, 2007. The reason for the Fed’s decision was fears of recession following the sub-prime credit crisis. Impressive growth rates and appreciating rupee resulted in large inflows especially portfolio investment. As the move was driven more by market exuberance rather than any change in fundamentals, RBI intervened aggressively to protect the pace if not the level of rupee. The extent of RBI’s dollar purchases is reflected in the USD 3.7 bn increase in its foreign exchange reserves during the week ended Sept 21. Besides direct market intervention, RBI also liberalized overseas investment norms for Indian companies and mutual funds raised the prepayment limit for ECB’s and doubled the foreign remittance limit for individuals. Modifications were also introduced on participatory notes to make investment flows transparent apart from easing of FII registration norms with SEBI. For ECB the amount that could be brought in was capped at USD 20mn per corporate per year. The consequence of this active intervention was that rupee has stayed ranged despite strong inflows.

北美代写,论文Essay代写,网课代修,Exam代考 This second phase of rupee appreciation has pushed liquidity management as a top priority: In order to ensure that the intervention does not erase the success gained in terms of control in inflation and non-food credit growth, RBI continued with the simultaneous sterlisation policy. Basically combination of three tools has been used: (i) Absorption of liquidity through its reverse repo window at a cost of 6%. (ii) Raising CRR, which is currently at 7.5% (iii) Issuance of MSS bonds to manage the issue of injected liquidity. Though there were associated costs with these sterilization tools (refer note 1 below for more details), RBI continued with it for the above-mentioned reasons as well as to manage export competitiveness. Withdrawal of the ceiling on daily reverse repos under the LAF in August and hike in CRR by 50 basis points in August to 7% and again in November to 7.5% helped absorbing excess liquidity during this period. Also ceiling for outstanding MSS bonds was raised to Rs. 2,50,000 cr on November 7, 2007 in a phased manner.

3. Going Forward - Will the rupee continue to appreciate in 2008 also?

A look at inflows from supply and demand perspective in 2008:

北美代写,论文Essay代写,网课代修,Exam代考 Supply side - Will the inflows continue to come in the system at the same pace?

Most probably not, as the biggest chunk of inflows, which was pumped in by FII’s—aggregated to USD 26.8 bn during April 2007- January 11, 2008 was due of market exuberance rather than fundamental change. Therefore we can expect these flows to resume to normal levels. Infact there have been significant outflow of funds on account of FII’s aggregating to USD 3.2 bn since January 10, 2008 despite Fed cutting it’s rate to 3%. Rapid escalation of risk aversion could be a possible reason for such outflows.

Whereas ECB’s, another important source of inflows--amounted to USD 10.6 bn from April-September 2007-08, can also slow in future because of the global credit squeeze, which could be around USD 2 trillion because of sub prime crises.

北美代写,论文Essay代写,网课代修,Exam代考 Demand side—Active market intervention: RBI has continued to say that it will intervene, as India is a developing economy, with inflexible mechanism, therefore steps are needed to smoothen out volatility. However the challenges of intervention and management of expectations will be particularly daunting in case of financial contagion, because such events are characterised by suddenness, high speed and large magnitudes of unexpected flows, in either direction.

北美代写,论文Essay代写,网课代修,Exam代考 RBI sterlisation policy: Since inflation remains a concern, RBI will continue to sterlise these interventions. Currently the level of current account deficit is lower than the amount of capital inflows. Therefore the enlargement of absorptive capacity would be an appropriate approach, but only up to the limit of sustainable levels which is achievable over the medium term under normal circumstances.

There has also been growing concern about the use of appropriate mix of instruments for sterlisation. The LAF is used for very short period flows. The MSS handles the longer-term flows slightly better than the LAF, and the CRR is more appropriate for addressing fairly longer-term flows. However effectiveness of the MSS depends more on the initiatives of the market participants than on the decisions of the RBI.

Growing global uncertainties: There are worries about global slowdown impacting both our exports as well as capital flows. With the external sector now accounting for almost 40% of GDP, we cannot be fully immune to international developments. Therefore we need to redouble our efforts to maintain the domestic drivers of growth and ensure that policy facilitates even faster growth. However considerable sluggishness in the domestic industrial sector is a cause of concern. IIP in November declined to 5.3%, against 15.8% in the same month last year, which is lowest since October 2006. Although the cumulative growth for the period April-November 2007-08 was at 9.2% over the corresponding period of the pervious year. Consumer demand has taken a hit due to high interest rates while investment demand continues to be strong, as indicated by 11.2% growth in the machinery and equipment sector and 24.5% growth in capital goods production over 29.4 % a year ago.

Fiscal actions to be export competitive? Capital account openness is beneficial when it is appropriately teamed with other policies--monetary and fiscal. RBI will continue to use MSS, CRR and LAF to manage the challenges of monetary policy. However there are suggestions to use fiscal policy, as the main tool for countering appreciation of the currency. Which requires raising taxes and cutting public spending to control currency appreciation. This is politically challenging, but it is a necessary corollary of the decision to free capital flows.

Possibility of outflows liberalization: It is sometimes, suggested that encouraging outflows would be a good solution to manage surging inflows, because they help reducing the pressures on currency and inflation. However, liberalising outflows may not be of great help in the short run because a greater liberalised regime generally attracts more inflows, as also seen in second phase of rupee appreciation. However recourse to some encouragement to outflows such as the liberalisation of overseas investment by our corporates in the real sector is helpful, though it has to be combined with other measures to manage the flows depending on their intensity.

Possibility of more restriction on inflows if pace again become strong: An inescapable consequence of growth is greater capital inflows. The cautious approach to opening the capital account followed thus far as a conscious act of policy has given the government some leeway in limiting inflows of certain categories. However in order to control these flows it is important to recognise the relative attractiveness of different types of flows. In this regard FDI is the most preferred form of flow since it comes packaged with technological and organisational know-how. These benefits may be true of equity but not true of debt finance. But unlike most FDI, inflows through FII’s are inflationary. Investments in Indian firms through the stock market and by venture capital funds in unlisted companies are also potentially beneficial. While ECB’s and other short-term flows are areas where one can introduce an element of control to moderate sudden surges, as has been done in second phase of rupee appreciation.

Does this mean that no further rupee appreciation? Not really. RBI will continue to intervene to arrest any fast pace of appreciation. Hence will allow rupee to appreciate at a gradual level.

*Note 1: Issuance of MSS bonds has a fiscal cost as government has to pay interest on bonds. This represents an opportunity cost, since the same funds could have been used for development purpose. RBI bears the cost when it sucks out liquidity through its reverse repo window while the banking system bears the cost when CRR is raised. Also sustained absorption of liquidity through any or combination of the above measures sooner or later gets reflected in higher interest costs for borrowers, which adversely affect the growth in investments and consumption. Beside the direct fiscal cost mentioned above, there is the indirect cost to the economy of allowing ECB’s by companies at much higher interest rates than what the RBI receives for its reserves held as safe assets abroad.

流動資金及匯率管理(2007-08 )

在2007-08年度繼續面對打點的主要問題,一直穩步增長,外匯流入。這些大震蕩流入12% ,兌美元快速升值導致盧比,幾乎伴隨著高利率經濟。
1。盧比升值的第一階段 - 由于打點退一步從市場:加強全面響應全球疲軟的美元在外匯市場積極干預打點阻止盧比。事實上,外匯儲備增加86億美元,從2004年至2007年3月表示干預的規模。然而,這明顯的后果是增加貨幣供應量和通貨膨脹。 WPI作為衡量通貨膨脹跑高達6-6.8 % ,從1月到2007年4月,而M3的持續徘徊以上打點的舒適區。通脹上升的擔憂最終迫使打點一步之遙,從2007年4月在外匯市場。如因盧比升值以迅猛的速度在四月和五月約10 % 。除了影響人民幣的升值速度,決定遠離市場導致改變期望盧比。市場預期的貨幣,只在一個方向移動,即欣賞,欣賞和贊賞。
打點一步之遙從市場正確的決定?我覺得需要被視為在高通脹的背景下,現行年初決定。雖然盧比升值,出口增長有負面影響,但持續的舉動可能引發通脹的投入增加出口成本,并最終將非出口的競爭力,盡管匯率穩定。雖然它可以是不可爭議的,如果打點允許一個漸進的基礎上升值一段時間,而不是一個完整的一個月側加強,痛苦的人會少得多。這將有調整使公司的成本核算和期望,連續的基礎上,而不是來對付它一舉。
也許,這是一個經典的“荷蘭病”的情況下,非貿易成為超過定價和流通部門,削弱經濟競爭力。強調“需要”來約束這些資本流動和經濟的吸收能力增強。
然而,要總結,第一階段升值通過打點的行動引起的或說在外匯市場上的無所作為 - 一個外生因素,而不是市場力量說,資金流入增加。
2。在第二階段,盧比升值:盧比是再次強大的升值壓力下作為美聯儲削減它的速率由0.5個百分點至4.75%年9月18 ,二零零七年,隨后一個季度百分比點削減至4.5 %, 2007年10月31日。美聯儲的決定的原因是次級信貸危機后經濟衰退的擔憂。令人印象深刻的增長率和盧比升值導致的大量流入,尤其是投資組合。作為移動市場的繁榮,而不是任何基本面變化帶動更多的,打點干預,積極保護的步伐,如果不是水平盧比。打點的美元購買的程度是體現在美元在其外匯儲備截至9月21日的一周內增加3.7億。除了直接的市場干預,打點也放開了印度公司和共同基金的海外投資規范提出提前還款的限制,歐洲央行的一倍為個人外匯匯款限額。修改參與票據還引入了使投資流動透明的,除了放寬外國機構投資者在SEBI??注冊規范。對于歐洲央行可能帶來的金額上限為每個企業每年2,000萬美元。這種積極干預的后果是,盧比不等,盡管一直保持強勁的資本流入。
盧比升值的第二階段推流動性管理作為重中之重:為了確保干預不會刪除在控制通脹和非食品信貸增長方面取得的成功,繼續打點的同時sterlisation政策。組合基本上已經使用三種工具:(一)吸收流動性通過其反向回購窗口在6%的成本。 (二)提高檔案室,這是目前在7.5 % (三)發行, MSS債券注入流動性管理問題。雖然有這些消毒工具的相關費用(請參閱下文附注1更多的細節) ,繼續打點上述理由,以及管理的出口競爭力。提款8月每日反向回購協議下的LAF的天花板上,并在8月至7%和11月7.5%的50個基點,加息在CRR幫助吸收多余的流動性,在此期間。優秀MSS債券上限提高盧比。 2,50,000 CR分階段在2007年11月7日。
3。展望未來 - 盧比,在2008年也繼續升值嗎?
從供給和需求的角度來看,2008年流入一看:
供應方 - 流入系統中以同樣的速度繼續來?
最有可能,最大的一塊流入,被抽中的FII's匯總至26.8億美元在2007年4月 - 1月11日, 2008年由于市場的繁榮,而不是根本性的變化。因此,我們可以預期這些流量恢復到正常水平。逸岸已經有顯著的資金流出考慮外國機構投資者的合3.2億美元,自2008年1月10日,盡管美聯儲削減它的速率為3% 。快速升級的風險厭惡可能是這種外流的一個可能的原因。
而歐洲央行的資金流入的另一個重要來源 - 2007-08 9月達10.6億美元,也可以在未來放緩,因為全球信貸緊縮,這可能是因為次貸危機的2萬億美元左右。
需求側活躍市場干預:打點繼續說,它會介入,印度是一個發展中的經濟體系,機制不靈活,因此需要采取措施理順波動。然而,預期干預和管理的挑戰將是在金融危機蔓延的情況下尤為艱巨,因為這類事件的特點是突發性,高速和大意想不到的流量大小,在任何一個方向。
打點sterlisation政策:由于通脹仍令人擔憂, RBI將繼續這些干預, sterlise 。目前經常帳赤字水平低于資本流入量。因此吸收能力的擴大將是一個合適的方法,但在正常情況下,在中期實現可持續的水平,這是到了極限。
同時也出現了適當的手段組合使用sterlisation的日益關注。用于流動資金調節機制很短時間內流動。 MSS處理長期流動略優于LAF ,和相當長期流動,檔案室是比較合適的。然而, MSS的有效性取決于市場參與者的積極性比打點的決定。
不斷增長的全球不確定性:全球經濟放緩的擔心影響我們的出口以及資本流動。隨著現在對外部門占國內生產總值的近40% ,我們不能完全免疫的國際發展。因此,我們需要加倍努力,以維持國內的增長驅動力,并確保該政策有利于更快的增長。然而相當低迷的國內工業部門是一個值得關注的問題。國際投資頭寸在11月下降至5.3% ,對去年同月,這是2006年10月以來的最低水平15.8% 。雖然2007-08年4月-11月期間累計增長的上一年度同期為9.2% 。消費需求已經受到了沖擊,由于高利率,而投資需求繼續保持強勁,增長11.2% ,機械設備板塊和資本貨物生產增長24.5% ,超過去年同期的29.4% 。
財政行動是出口競爭力?資本賬戶的開放是有益的,當它被適當地與其他政策 - 貨幣政策和財政合作。 RBI將繼續使用MSS ,檔案室和LAF管理貨幣政策的挑戰。然而,有建議,運用財政政策,為對付貨幣升值的主要工具。這需要提高稅收和削減公共開支,以控制貨幣升值。這是政治上具有挑戰性的,但它是一個資本自由流動的決定的必然結果。
流出自由化的可能性:有時,建議,鼓勵流出,將是一個很好的解決方案來管理洶涌的流入,因為它們有助于減少貨幣和通貨膨脹的壓力。但是,流出的自由化可能不會在短期內有很大的幫助,因為更大的自由化一般吸引更多的資金流入,也看到了盧比升值的第二階段。然而,訴諸一些鼓勵我們的企業債券的海外投資自由化的實體經濟部門,如流出是很有幫助的,雖然它必須結合其他措施,以管理流動取決于其強度。
對資本流入的限制,如果步伐再次變得強大:經濟增長的一個不可避免的后果的可能性是更大的資本流入。開放資本賬戶的審慎做法沿襲迄今,作為一種自覺行為的政策已經給政府限制某些類別的流入一些余地。不過,為了控制這些流量,重要的是要認識到不同類型的流量的相對吸引力。在這方面,外國直接投資流量,因為它涉及包裝技術和組織訣竅是最喜歡的形式。這些利益可能是真正的股票,但不是真正的債務融資。但不像大多數外國直接投資,通過外國機構投資者的資金流入是通脹。印度企業通過股市和風險資本基金投資于非上市公司也可能有利。雖然歐洲央行和其他短期資本流動是其中一個可以控制的要素引入到中度突然上漲,盧比升值的第二階段已經完成。
這是否意味著沒有進一步盧比升值?真的沒有。印度儲備銀行將繼續進行干預,以制止任何快速的升值步伐。因此將允許盧比升值一個漸進的水平。
*注1 : MSS債券的發行有財政成本作為政府支付的債券利息。這代表一種機會成本,因為同樣的資金可能已被用于發展的目的。 RBI承擔的成本時,它吸出通過其反向回購窗口的流動性,而銀行體系承擔CRR時的成本提高。也持續吸收或通過任何上述措施相結合的流動性遲早會反映在更高的利息成本的借款人,在投資和消費的增長產生不利影響的。除了上面提到的直接財政成本,是對經濟的間接成本,允許歐洲央行的企業更高的利率比什么打點接收國外作為安全資產持有其儲量。
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