Abstract:
Against the background of international scenario of exchange rate volatility, the present paper analyzes rupee volatility and its impact on the macroeconomic variables of India considering data for the period 1997-2013. The evidence shows that the exchange rate volatility of India is not purely a domestic phenomenon. Further, the results of log-log regression model show that the negative impact of depreciation is limited to inflation and trade balance. All other variables show positive impact. Thus, strong empirical evidence is obtained to conclude that the impact of appreciation on macroeconomic variables is higher as compared to that of depreciation on these variables.
