Publication:
From Tapering to Tightening : The Impact of the Fed's Exit on India

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dc.contributor.authorBasu, Kaushik
dc.contributor.authorEichengreen, Barry
dc.contributor.authorGupta, Poonam
dc.date.accessioned2014-10-30T19:47:45Z
dc.date.available2014-10-30T19:47:45Z
dc.date.issued2014-10
dc.description.abstractThe "tapering talk" starting on May 22, 2013, when Federal Reserve Chairman Ben Bernanke first spoke of the possibility of the U.S. central bank reducing its security purchases, had a sharp negative impact on emerging markets. India was among those hardest hit. The rupee depreciated by 18 percent at one point, causing concerns that the country was heading toward a financial crisis. This paper contends that India was adversely impacted because it had received large capital flows in prior years and had large and liquid financial markets that were a convenient target for investors seeking to rebalance away from emerging markets. In addition, India's macroeconomic conditions had weakened in prior years, which rendered the economy vulnerable to capital outflows and limited the policy room for maneuver. The paper finds that the measures adopted to handle the impact of the tapering talk were not effective in stabilizing the financial markets and restoring confidence, implying that there may not be any easy choices when a country is caught in the midst of rebalancing of global portfolios. The authors suggest putting in place a medium-term policy framework that limits vulnerabilities in advance, while maximizing the policy space for responding to shocks. Elements of such a framework include a sound fiscal balance, sustainable current account deficit, and environment conducive to investment. In addition, India should continue to encourage relatively stable longer-term flows and discourage volatile short-term flows, hold a larger stock of reserves, avoid excessive appreciation of the exchange rate through interventions with the use of reserves and macroprudential policy, and prepare the banks and firms to handle greater exchange rate volatility.en
dc.identifierhttp://documents.worldbank.org/curated/en/2014/10/20308181/tapering-tightening-impact-feds-exit-india
dc.identifier.doi10.1596/1813-9450-7071
dc.identifier.urihttps://hdl.handle.net/10986/20493
dc.languageEnglish
dc.language.isoen_US
dc.publisherWorld Bank Group, Washington, DC
dc.relation.ispartofseriesPolicy Research Working Paper;No. 7071
dc.rightsCC BY 3.0 IGO
dc.rights.urihttp://creativecommons.org/licenses/by/3.0/igo/
dc.subjectADVANCED COUNTRIES
dc.subjectADVANCED ECONOMIES
dc.subjectASSET CLASS
dc.subjectASSET CLASSES
dc.subjectASSET PRICES
dc.subjectBALANCE OF PAYMENTS
dc.subjectBALANCE OF PAYMENTS CRISIS
dc.subjectBALANCE SHEET
dc.subjectBANK DEPOSITS
dc.subjectBANK POLICY
dc.subjectBASIS POINTS
dc.subjectBOND
dc.subjectBOND FLOWS
dc.subjectBOND FUNDS
dc.subjectBOND SPREADS
dc.subjectBOND YIELD
dc.subjectBOND YIELDS
dc.subjectBONDS
dc.subjectBROAD MONEY
dc.subjectBUSINESS ENVIRONMENT
dc.subjectCAPITAL ACCOUNT
dc.subjectCAPITAL ACCOUNTS
dc.subjectCAPITAL CONTROLS
dc.subjectCAPITAL FLOWS
dc.subjectCAPITAL GAINS
dc.subjectCAPITAL INFLOWS
dc.subjectCAPITAL MARKET
dc.subjectCAPITAL MOBILITY
dc.subjectCAPITAL OUTFLOWS
dc.subjectCAPITAL REQUIREMENTS
dc.subjectCENTRAL BANK
dc.subjectCENTRAL BANKS
dc.subjectCOMMODITIES
dc.subjectCORPORATE BONDS
dc.subjectCREDIT LINES
dc.subjectCREDIT RISK
dc.subjectCRISES IN EMERGING MARKETS
dc.subjectCURRENCY
dc.subjectCURRENCY CRISES
dc.subjectCURRENCY DEPRECIATION
dc.subjectCURRENT ACCOUNT
dc.subjectCURRENT ACCOUNT BALANCE
dc.subjectCURRENT ACCOUNT DEFICIT
dc.subjectDEBT
dc.subjectDEBT FLOWS
dc.subjectDEBTS
dc.subjectDEFICITS
dc.subjectDEPOSIT
dc.subjectDEPOSIT MOBILIZATION
dc.subjectDEPOSITS
dc.subjectDEVELOPING COUNTRIES
dc.subjectDIRECT INVESTMENT
dc.subjectDOMESTIC BOND
dc.subjectDOMESTIC BOND MARKETS
dc.subjectDOMESTIC MARKETS
dc.subjectECONOMIC GROWTH
dc.subjectEMERGING ECONOMIES
dc.subjectEMERGING ECONOMY
dc.subjectEMERGING MARKET
dc.subjectEMERGING MARKET ECONOMIES
dc.subjectEMERGING MARKETS
dc.subjectEQUITY FLOWS
dc.subjectEQUITY MARKETS
dc.subjectEQUITY PORTFOLIO
dc.subjectEQUITY PRICES
dc.subjectEXCHANGE RATE
dc.subjectEXCHANGE RATE MOVEMENTS
dc.subjectEXCHANGE RATE REGIME
dc.subjectEXCHANGE RATE VOLATILITY
dc.subjectEXCHANGE RATES
dc.subjectEXPENDITURE
dc.subjectEXPORTERS
dc.subjectEXPOSURE
dc.subjectEXTERNAL COMMERCIAL BORROWING
dc.subjectEXTERNAL COMMERCIAL BORROWINGS
dc.subjectEXTERNAL DEBT
dc.subjectEXTERNAL FINANCING
dc.subjectFEDERAL RESERVE
dc.subjectFEDERAL RESERVE BANK
dc.subjectFINANCIAL CRISIS
dc.subjectFINANCIAL DEVELOPMENT
dc.subjectFINANCIAL INSTITUTIONS
dc.subjectFINANCIAL MARKET
dc.subjectFINANCIAL MARKETS
dc.subjectFINANCIAL VULNERABILITIES
dc.subjectFINANCIAL WEAKNESSES
dc.subjectFISCAL BALANCE
dc.subjectFISCAL DEFICIT
dc.subjectFLEXIBLE EXCHANGE RATES
dc.subjectFOREIGN ASSETS
dc.subjectFOREIGN CURRENCY
dc.subjectFOREIGN EXCHANGE
dc.subjectFOREIGN EXCHANGE MARKET
dc.subjectFOREIGN EXCHANGE MARKETS
dc.subjectFOREIGN EXCHANGE RISK
dc.subjectFOREIGN INVESTMENT
dc.subjectFOREIGN INVESTORS
dc.subjectFOREIGN RESERVES
dc.subjectGLOBAL FINANCE
dc.subjectGLOBAL FINANCIAL STABILITY
dc.subjectGLOBAL INVESTORS
dc.subjectGLOBAL LIQUIDITY
dc.subjectGLOBAL PORTFOLIO
dc.subjectGLOBAL PORTFOLIOS
dc.subjectGOLD
dc.subjectGROWTH RATE
dc.subjectHIGH INFLATION
dc.subjectHOLDING
dc.subjectHOLDINGS
dc.subjectIMBALANCES
dc.subjectIMMOVABLE PROPERTY
dc.subjectIMPORT
dc.subjectIMPORTS
dc.subjectINCOME
dc.subjectINFLATION
dc.subjectINFLATION ENVIRONMENT
dc.subjectINFLOWS OF CAPITAL
dc.subjectINSURANCE
dc.subjectINTEREST RATE
dc.subjectINTEREST RATE DIFFERENTIAL
dc.subjectINTEREST RATES
dc.subjectINTERNATIONAL BANK
dc.subjectINTERNATIONAL FINANCIAL STATISTICS
dc.subjectINTERNATIONAL RESERVES
dc.subjectINVESTING
dc.subjectINVESTMENT DECISIONS
dc.subjectLEVEL OF DEBT
dc.subjectLEVY
dc.subjectLIABILITY
dc.subjectLINE OF CREDIT
dc.subjectLINES OF CREDIT
dc.subjectLIQUIDITY
dc.subjectLIQUIDITY PROBLEMS
dc.subjectLIQUIDITY RISK
dc.subjectLOAN
dc.subjectLOCAL CURRENCY
dc.subjectLOCAL FINANCIAL MARKETS
dc.subjectLOCAL INVESTORS
dc.subjectLONG-TERM DEBT
dc.subjectLOOSE MONETARY POLICY
dc.subjectLOSS OF CONFIDENCE
dc.subjectMACROECONOMIC CONDITIONS
dc.subjectMACROECONOMIC POLICIES
dc.subjectMACROECONOMIC POLICY
dc.subjectMACROECONOMIC VARIABLES
dc.subjectMACROECONOMIC VULNERABILITIES
dc.subjectMACROECONOMIC VULNERABILITY
dc.subjectMARKET PARTICIPANTS
dc.subjectMARKET PRESSURE
dc.subjectMARKET STRUCTURE
dc.subjectMARKET TURNOVER
dc.subjectMATURITY
dc.subjectMONETARY FUND
dc.subjectMONETARY POLICIES
dc.subjectMONETARY POLICY
dc.subjectOFFSHORE MARKET
dc.subjectOIL PRICES
dc.subjectOPEN MARKET
dc.subjectOPPORTUNITY COST
dc.subjectPOLICY RESPONSE
dc.subjectPORTFOLIO
dc.subjectPORTFOLIO CAPITAL
dc.subjectPORTFOLIO CAPITAL INFLOWS
dc.subjectPORTFOLIO FLOWS
dc.subjectPORTFOLIO INFLOWS
dc.subjectPORTFOLIO INVESTMENT
dc.subjectPORTFOLIOS
dc.subjectPRIVATE CAPITAL
dc.subjectPRIVATE CAPITAL FLOWS
dc.subjectPRIVATE CAPITAL INFLOWS
dc.subjectPRIVATE DEBT
dc.subjectPRIVATE INFLOWS
dc.subjectPRIVATE INVESTMENT
dc.subjectPRIVATE SAVINGS
dc.subjectPROPERTY INVESTMENT
dc.subjectPUBLIC DEBT
dc.subjectPUBLIC INVESTMENT
dc.subjectRATE OF DEPRECIATION
dc.subjectREAL EFFECTIVE EXCHANGE RATE
dc.subjectREAL EXCHANGE RATE
dc.subjectREAL EXCHANGE RATES
dc.subjectREDEMPTION OPTIONS
dc.subjectREMITTANCES
dc.subjectRESERVE BANK
dc.subjectRESERVE REQUIREMENTS
dc.subjectRESERVES
dc.subjectRETURN
dc.subjectRETURNS
dc.subjectSECURITIES
dc.subjectSHORT TERM DEBT
dc.subjectSHORT-TERM DEBT
dc.subjectSHORT-TERM LIABILITIES
dc.subjectSHORT-TERM VOLATILITY
dc.subjectSLOWDOWN
dc.subjectSOLVENCY
dc.subjectSTANDARD DEVIATION
dc.subjectSTOCK MARKET
dc.subjectSTOCK MARKET CAPITALIZATION
dc.subjectSTOCK MARKET INDEX
dc.subjectSTOCK MARKET PRICES
dc.subjectSTOCK MARKETS
dc.subjectSTOCK PRICES
dc.subjectSTOCKS
dc.subjectSWAP
dc.subjectSWAPS
dc.subjectTRADE CREDIT
dc.subjectTRADING
dc.subjectTREASURY
dc.subjectTREASURY BILLS
dc.subjectTREASURY BONDS
dc.subjectTURNOVER
dc.subjectTURNOVER RATIO
dc.subjectTURNOVER_RATIO
dc.subjectVALUATION
dc.subjectVALUATION CHANGES
dc.subjectVOLATILITY
dc.subjectWEIGHTS
dc.subjectWITHDRAWAL
dc.subjectWITHDRAWAL FACILITY
dc.subjectWORLD DEVELOPMENT INDICATORS
dc.titleFrom Tapering to Tightening : The Impact of the Fed's Exit on Indiaen
dspace.entity.typePublication
okr.crossref.titleFrom Tapering to Tightening: The Impact of the Fed's Exit on India
okr.date.disclosure2014-10-15
okr.date.doiregistration2025-04-10T10:39:39.322321Z
okr.doctypePublications & Research::Policy Research Working Paper
okr.doctypePublications & Research
okr.docurlhttp://documents.worldbank.org/curated/en/2014/10/20308181/tapering-tightening-impact-feds-exit-india
okr.globalpracticeMacroeconomics and Fiscal Management
okr.globalpracticeFinance and Markets
okr.guid872041468044088310
okr.identifier.doi10.1596/1813-9450-7071
okr.identifier.externaldocumentum000158349_20141020171932
okr.identifier.internaldocumentum20308181
okr.identifier.reportWPS7071
okr.language.supporteden
okr.pdfurlhttp://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2014/10/20/000158349_20141020171932/Rendered/PDF/WPS7071.pdfen
okr.region.administrativeSouth Asia
okr.region.countryIndia
okr.topicMacroeconomics and Economic Growth::Macroeconomic Management
okr.topicFinance and Financial Sector Development::Currencies and Exchange Rates
okr.topicEconomic Theory and Research
okr.topicPrivate Sector Development::Emerging Markets
okr.topicFinance and Financial Sector Development::Debt Markets
okr.unitOff of Sr VP Dev Econ/Chief Econ (DECVP)
relation.isSeriesOfPublication26e071dc-b0bf-409c-b982-df2970295c87
relation.isSeriesOfPublication.latestForDiscovery26e071dc-b0bf-409c-b982-df2970295c87
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