Asymmetric exchange rate intervention and international reserve accumulation in India

The empirical evidence derived from the ARDL approach of Pesaran et al. [Pesaran, M.H., Shin, Y., Smith, R.J., 1996. Testing for the existence of a long-run relationship, DAE Working Paper No. 9622, Department of Applied Economics, University of Cambridge] suggests that volatility of external transactions has had a moderate impact on reserve demand in recent years. Instead, asymmetric exchange rate intervention triggered, perhaps, by concerns about Indiaʹs export competitiveness seems to have contributed to large stockpile of reserves.