Wednesday, August 21, 2013

Let the rupee sink

A country that decides to defend its exchange rate has only two options: impose capital controls or surrender independence over monetary policy. The Indian authorities have tried a bit of both. They have put restrictions on resident individuals and companies looking to invest overseas and in gold. The central bank has also raised short-term interest rates, thereby giving up its ability to use monetary policy to lift GDP growth from its 10-year low......

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