Capital-enhanced equilibrium exchange rate: evidence from India

摘要

This article examines the validity of the capital-enhanced equilibrium exchange rate (CHEER) approach using quarterly data ranging from 1993Q1 to 2016Q2. Using unit root break test andstructural break cointegration technique, ouroverall results indicated that the CHEER is invalidated once a structural break is accounted for in the cointegration relationship. The rejection of the validity could be attributed to the asymmetry in the capital flows and exchange rates being not fully flexible.