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The study of the dynamics of foreign exchange rates is of paramount importance to economic policy makers for developing countries like India that depend on foreign exchange to meet a large part of their import obligations. This paper uses the concepts of entropy to study the regularity/irregularity of the returns from the Indian Foreign exchange (forex) markets particularly during periods of economic instability. We use the Approximate Entropy and Sample Entropy statistics which measure the level of repeatability in the data are used to quantify the randomness in the forex returns for four major currencies namely the US Dollar, the British pound, the EURO and the Japanese Yen with respect to the Indian Rupee from the time period 2006 to 2021. These statistics are chosen as they are both statistical measures for assessing the randomness or regularity of time series data and enable researchers to objectively evaluate the degree of randomness present in the returns series and understand the crucial underlying patters or behaviors. In this research we look at two periods of major financial upheavals, the subprime crisis also known as the Global Financial Crisis (GFC) during 2006-2007 and the recent Covid-19 pandemic during 2020-2021. Our empirical results overwhelmingly confirm our working hypothesis that regularity in the returns of the major Indian foreign exchange rates increases during times of financial crisis. This is evidenced by a decrease in the values of the sample entropy and approximate entropy before and after/during the financial crisis period for the majority of the exchange rates. Our empirical results also show that Sample Entropy is a better measure of regularity than Approximate Entropy for the Indian forex rates which is in agreement with the theoretical predictions. Understanding the returns from foreign exchange rates during financial crises has important policy implications for various stakeholders, including market participants, policymakers, and regulators. It enables them to formulate better risk management and hedging strategies. It also helps policy makers in crisis management and contingency planning and safeguard the stability of the financial system. Exchange rate movements are interconnected across global markets, and crises often have cross-border implications. Collaborating on crisis management strategies across countries can help foster stability in international markets. [ABSTRACT FROM AUTHOR]

The existing empirical studies on the effectiveness of RBI intervention in the exchange rate market are based on single equation/GARCH models. Recognizing the interdependence between exchange rate returns, conditional volatility of exchange rate and RBI intervention, this study uses a simultaneous equations framework to examine the efficacy of intervention by RBI. Additionally, we control for the impact of macro-economic fundamental variables and micro-structure variable in our model. The econometric methodology used in the study includes two steps. In the first step, DF-GLS, Ng-Perron and, Lee and Strazicich unit root tests are used to examine the stationarity of the variables. In the second step, the simultaneous equations model is estimated using the generalized method of moments (GMM)-IV. This study is based on secondary data at monthly frequency, spreading from 1996:08 to 2016:10.The main findings of the study are as follows. The results of unit root tests suggest that all variables included in the analysis are stationary. The system GMM-IV estimates of the model indicate that exchange rate returns are influenced by RBI intervention, output growth differential, money supply growth differential, stock market returns, capital flows, EUR-USD exchange rate returns, change in trade balance differential and order flow. Additionally, the estimates of exchange rate volatility equation suggest that RBI intervention significantly decreases exchange rate volatility. Further, we find that volatility in capital flows has significant and positive impact on exchange rate volatility. The estimates of the central bank intervention equation suggests that exchange rate returns have a significant and negative impact on RBI intervention in foreign exchange rate market. We also find evidence for the presence of asymmetry in RBI intervention. The key implications of the study indicate that RBI intervention is effective in stabilizing the Indian exchange rate market in the face of both domestic and external shocks. Furthermore, exchange rate returns are significantly affected by RBI intervention, macro-economic variables and micro-structure variable. The findings of this study may be useful for formulating India's monetary policy. [ABSTRACT FROM AUTHOR]

This study examines the macroeconomic factors underlying FDI flows to India using cointegrating VAR with I(1) exogenous variables. The results indicate that conventional determinants such as a depreciating exchange rate, higher domestic returns, higher domestic output and better infrastructure are conducive to FDI flows to India. The results also indicate that macroeconomic instability has adverse effects while credit worthiness is conducive to FDI flows. A negative relation between trade openness and FDI is observed suggesting that FDI flows to India may be tariff jumping in nature. Empirical estimates also indicate that an increase in global FDI flows to other emerging economies reduces FDI flows to India indicating that India competes with other emerging economies in receiving FDI. Further, the results show that higher foreign output is conducive to FDI flows indicating procyclicality of FDI with economic performance of foreign countries. [ABSTRACT FROM AUTHOR]

Globalization of the early 1990s is thought to have caused the loss of monetary-policy independence in India. I find that Indias monetary-policy independence is anchored in the exchange-rate regime along with its state of foreign-exchange reserves, and not necessarily in globalization per se. India significantly followed US interest rates even in the absence of globalization in the 1960s when the country faced foreign-exchange constraints and maintained a fixed exchange rate. From the mid 1970s to the early 1990s, India exercised monetary-policy independence under a floating exchange-rate regime. The loss of monetary-policy independence since the early 1990s is not attributable to globalization per se, but mainly to the stable exchange-rate policy of India, which heavily resembles the policy of the 1960s. [ABSTRACT FROM AUTHOR]

The purpose of this paper is to re-examine the empirical relationship among alternative monetary aggregates (Ml and M2), output, prices, interest rates and exchange rates in India. The results of a five-variate vector error correction model are indicative of a bi-directional causality between each of the monetary aggregates and prices. Our findings of a feedback relationship make each of the monetary aggregates a poor intermediate target and informational variable. Moreover, contrary to most recent research in this area, the results are supportive of the real business-cycle view and the Keynesian monetary accommodation hypothesis rather than the monetarists' theory of the business cycle. [ABSTRACT FROM AUTHOR]