Date of Submission


Date of Award


Institute Name (Publisher)

Indian Statistical Institute

Document Type

Doctoral Thesis

Degree Name

Doctor of Philosophy

Subject Name



Economic Research Unit (ERU-Kolkata)


Sarkar, Nityananda (ERU-Kolkata; ISI)

Abstract (Summary of the Work)

The first chapter of this thesis begins with a brief review of the existing literature on foreign exchange rate models and their forecasting performance. Thereafter it presents the motivation as well as the main aspects of this study. The format of this chapter is as follows. A brief review of the relevant literature is presented in the first section. This review includes the important theoretical / structural as well as time series models of exchange rate. The motivation of the thesis is discussed in Section 1.2. Section 1.3 presents a brief account of the Indian economic reforms since 1993 with special emphasis on those carried out in case of foreign exchange rate. A brief review of the empirical studies on India’s foreign exchange rate is also given in this section. Finally, the focus and format of the thesis is described in Section A brief review of the models on foreign exchange rateIn economic debates, foreign exchange rate or exchange rate, in short, is always singled out as one of the most important economic and financial variables for an economy. Given the existence of separate national currencies, there is an evident need for the conversion of one currency into another when goods and services are traded internationally and international capital transactions across various countries occur. The foreign exchange rate is defined as the price of one country’s money in terms of that of another country. Thus, it is a means of comparison of prices of goods and services produced in different countries. A basic justification of a foreign exchange market is, therefore, to permit the conversion and transfer of funds between nations in the most efficient way possible. Now, it is worth stating that while exchange rate is an important variable for all countries, it is all the more so for the developing as well as emerging ones. These countries, by virtue of their weak currency status, are often affected most in case of an external event, and hence a stable currency is very important for such countries to build confidence in the economy. In fact, some experts have argued that exchange rate policies pursued by some developing countries in the late 1970s were inappropriate, and this caused acute overvaluation of their currencies and ultimately contributed to their debt crises. Such overvaluation may reduce exports, harm agriculture and generate destabilizing capital outflows in the developing countries. Issues like energy crisis which became prevalent in the 1970s, stimulated a new interest in matters of exchange rate adjustment and behaviour to external shocks since oil was being imported on a large scale by most of the countries including the developing ones. Prior to World War II, the 1930s saw a period of flexible exchange rates marked by high volatilities and competitive exchange rate policies. On December 27, 1945, the Bretton Woods conference of representatives from advanced countries agreed to begin a period of pegged, but adjustable exchange rates. It was believed that a more stable system of exchange rates would promote the growth of international trade.


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This work is licensed under a Creative Commons Attribution 4.0 International License.


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