To show impact of money supply and inflation on exchange rate of ₹ v/s $ and analyse it for the period 1980 to 1990, 1991 to 2000 and 2001 to 2012; a ppt by a group of students of Era Business Achool, New Delhi
2. OBJECTIVE
To show impact of money supply
and inflation on exchange rate of ₹
v/s
$ and analyse it for the period 1980 to
1990, 1991 to 2000 and 2001 to 2012
Group Members
Jay Krishna
Col Ajay K Raina, SM
Saurabh Daravaria Era Business School
Era Business School
Deepika Handoo
AK Mishra
AnantAjay K Raina;
AJ/ Maheshwari
AJ/ Ajay K Raina; PGDM 12’14
4. Broad Parameters
• Data, as used in the presentation, are in terms of
percentage (YoY) increase.
• The following values have been used:– ER – Market price, averaged to calendar year.
– Inflation – GDP deflator.
– Money Supply – Narrow Money only.
Era Business School
AJ/ Ajay K Raina;
5. 1980- 1990
14.00
COMPARATIVE INFLATIONARY TRENDS
12.00
10.00
8.00
GDPd India%
GDPd US%
6.00
4.00
2.00
0.00
1980
1981
1982
1983
Era Business School
1984
1985
1986
1987
1988
AJ/ Ajay 1990
K Raina;
1989
8. 1980- 1990
BOP Million $
1000.00
500.00
0.00
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
-500.00
-1000.00
BOP Million $
-1500.00
-2000.00
-2500.00
-3000.00
Era Business School
AJ/ Ajay K Raina;
9. 1980- 1990
Overall Equations
Year
Inflation %
India
Inflation %
USA
M1 India
Bn ₹
1980
11.51
9.12
200
1990
10.67
3.79
810.10
Era Business School
M1 USA Bn
$
ER
1$=….₹
BOP Mn $
465
7.88
-1140
907
17.50
-2492
AJ/ Ajay K Raina;
10. 1991- 2000
COMPARATIVE INFLATIONARY TRENDS
16.00
14.00
12.00
10.00
8.00
GDPd India%
GDPd US%
6.00
4.00
2.00
0.00
1991
1992
1993
Era Business School
1995
1996
1994
1997
1998
AJ/ Ajay2000Raina;
K
1999
13. 1991- 2000
BOP Million $
10000.00
8000.00
6000.00
4000.00
BOP Million $
2000.00
0.00
1991
-2000.00
1992
1993
1994
1995
Era Business School
1996
1997
1998
AJ/ Ajay K Raina;
14. 1991- 2000
Overall Equations
Year
Inflation %
India
Inflation %
USA
M1 India
Bn ₹
1991
13.75
3.40
929
2000
3.65
2.16
2678.44
Era Business School
M1 USA Bn
$
ER
1$=….₹
BOP Mn $
985.80
22.69
2599
1211.51
41.27
4222
AJ/ Ajay K Raina;
18. 2001- 2012
BOP Million $
100000.00
80000.00
60000.00
40000.00
BOP Million $
20000.00
0.00
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
-20000.00
-40000.00
Era Business School
AJ/ Ajay K Raina;
19. 2001- 2012
Overall Equations
Year
Inflation %
India
Inflation %
USA
M1 India
Bn ₹
2001
3.18
2.27
3794.33
2011/ 7.75
12
1.72
17342.34
Era Business School
M1 USA Bn
$
ER
1$=….₹
BOP Mn $
1213.52
7.88
11757
2323.95
17.50
-12832
AJ/ Ajay K Raina;
22. 1980- 2012
INFLATION+ ER+ MS
35.00
30.00
25.00
20.00
15.00
ER% incr
GDPd India%
10.00
GDPd US%
M1 growth% $
M1 growth % ₹
5.00
0.00
-5.00
-10.00
-15.00
Era Business School
AJ/ Ajay K Raina;
23. And once we add Forex and Foreign Debts (all in % YoY).…..
120.00
100.00
80.00
60.00
ER% incr
GDPd India%
40.00
GDPd US%
M1 growth% $
M1 growth % ₹
20.00
Foreign Debt %
Forex%
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980
0.00
-20.00
-40.00
-60.00
This is where we had started from
Era Business School
AJ/ Ajay K Raina;
24. Methodology
• Guidance : Our gratitude to Prof JS Dahiya
• Secondary research based on the following websites:–
–
–
–
–
–
–
–
–
–
http://www.imf.org
IMF
http://dbie.rbi.org.in
Reserve Bank of India
http://commerce.nic.in/
Ministry of Commerce
http://databank.worldbank.org World Bank
http://www.inflation.eu
EU
http://mospi.nic.in
Ministry of Stat and Pgme Implementation
www.IndianJournals.com
Publisher
http://labourbureau.nic.in/indnum.htm
Labour Bureau
http://oldfraser.lexi.net/publications/ Publisher
http://fxtop.com/en/currency-converter-past.php Historical
Currency rates.
– http://www.federalreserveonline.org/ Fed Res Ajay K Raina;
Era Business School
AJ/
25. Comparison with Article….
• The article, “Solving the Riddle” (Cato Institute;
published in Business India) simplistically explains
the change in currency value.
• The main factors that influence ER, as per the
article, are as under:– Inflationary Pressure;
– Money Supply; and
– BoP/ Forex.
• Our research has highlighted the above linkages
too and yet do believe that there are certain
hidden forces that have a role, big or small, to play
in such fluctuations.
Era Business School
AJ/ Ajay K Raina;
26. ……Comparison with Article
• Differential in interest rates, foreign debts and
perception about country’s political and economic
performance are some of the key factors that have
a role to play. These being out of the purview of
today’s presentation, same have been left out.
THANK YOU!
Era Business School
AJ/ Ajay K Raina;