Modeling International Trinity & Policy Choices for India

This study is an attempt to test the validity of trinity hypothesis and to measure the cost of capital account convertibility which Indian economy has paid in the form of one of the cornerns of trinity triangle. The monthly data obtained from various publications of RBI and IMF over the period 1980:M1 to 2016:M12 have been utilized to construct three trinity indices of Monetary Independence (MI), Exchange Rate Stability (ERS), and Capital Account Openness (CO).Using the graphical and cointegration tools, the existence of trinity hypothesis has been confirmed in Indian context. It has been noticed that India has clearly chosen capital openness (CO) over exchange rate stability (ERS).