Indian Journal of Industrial Relations: Economics & Social Dev.

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Predicting Indian Foreign Exchange Market Crashes through Log-Periodic Power Law


Affiliations
1 Assistant Professor, Prestige Institute of Management and Research, Indore, India
2 Institute of Management Studies, Indore, India
3 Indore based Entrepreneur and Freelancer, India
     

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A sudden crash in the foreign exchange market can wipe out a lot of value for the investors in the market. The present study analyzes crashes in the Indian foreign exchange market using Log-Periodic Power Law during1997- 2011.The fall in prices in Indian foreign exchange market is less than required due to the fact that, though there is full current account convertibility, there still are restrictions on capital account convertibility. Further, the Central Bank intervenes in the foreign exchange market to influence the exchange rate of Rupee. Log-Periodic Power Law will be more applicable in a situation where there will be no restrictions and controls on exchange rate determination.



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  • Predicting Indian Foreign Exchange Market Crashes through Log-Periodic Power Law

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Authors

Varun Sarda
Assistant Professor, Prestige Institute of Management and Research, Indore, India
Yamini Karmarkar
Institute of Management Studies, Indore, India
Neha Lakhotia Sarda
Indore based Entrepreneur and Freelancer, India

Abstract


A sudden crash in the foreign exchange market can wipe out a lot of value for the investors in the market. The present study analyzes crashes in the Indian foreign exchange market using Log-Periodic Power Law during1997- 2011.The fall in prices in Indian foreign exchange market is less than required due to the fact that, though there is full current account convertibility, there still are restrictions on capital account convertibility. Further, the Central Bank intervenes in the foreign exchange market to influence the exchange rate of Rupee. Log-Periodic Power Law will be more applicable in a situation where there will be no restrictions and controls on exchange rate determination.



References