| Pub. Date | : Apr, 2019 |
|---|---|
| Product Name | : The IUP Journal of Management Research |
| Product Type | : Article |
| Product Code | : IJMR11904 |
| Author Name | : C N M Lavanya and Shivappa |
| Availability | : YES |
| Subject/Domain | : Management |
| Download Format | : PDF Format |
| No. of Pages | : 16 |
There is an inextricable link between money market and foreign exchange (forex) market. The policy rates of India consist of the repo and reverse repo rates, in addition to the Marginal Standing Facility (MSF) rate and bank rate. This study examines the changes (hike/reduction) in policy rates against the backdrop of the prevalent global and domestic scenarios. It also maps the changes in spot rates of Indian Rupee-US Dollar (INR-USD) and Indian Rupee-Euro (INR-EUR) and the forward premium/discount of 1-month USD for the time period January 2011 to September 2016. It elaborates the spread analysis for the repo rate and reverse repo rate on the one hand, and MSF rate and bank rate, on the other. The repo rate has a high degree of correlation with reverse repo rate and a moderately high degree of association with MSF rate. Bank rate and MSF rate have been closely aligned for some time now.
The Reserve Bank of India’s (RBI)’s stance of monetary policy has been conditioned
by the growth-inflation dynamics, placed against the backdrop of globally uncertain
economic milieu.
Against the backdrop of the prevalent global and domestic scenarios, the present
study elaborates the spread analysis for the repo rate and reverse repo rate on the
one hand, and MSF rate and bank rate, on the other. It also studies the changes in
the policy rates vis-à-vis those in spot exchange rates against US dollar and euro,
for the time period January 2011 to September 2016.