Exchange rate pass through and volatility on Indian foreign trade

Abstract

The exchange rate pass-through and exchange rate volatility are important determinants of the effectiveness of exchange rate depreciation in achieving the desired trade balance. The aggregate analysis of tndian imports and exports with quarterly data from 1980 to 1996 attempted in the present paper reveals India's lack of bargaining power in the international markets both as a buyer and as a seller, The study also indicates that targeting REER in India may not satisfactorily address the concerns for the trade balance, though it may be useful for export promotion.