The use of multiple currency based macroprudential tools by Reserve Bank of India, India’s central bank, has helped create resilience in the economy, especially during financial turmoil. However, in a democratic set-up like India, the analysis of capital based macroprudential reforms needs to incorporate the political stability, as there is increasing evidence that macroprudential policy effectiveness is closely linked to political conditions. This study incorporates the role of political stability is understanding the effectiveness of currency based macroprudential policies, by using the years of election as a proxy for political uncertainty. I develop an index of capital based macroprudential policies (CMPP) using the notifications on capital flows and risk management guidelines on foreign exchange exposures from Reserve Bank of India. Using a GARCH model, the impact of CMPP on the net capital inflows is analyzed for the period from January, 1997 to March, 2018. I find that while the presence of CMPP leads to a fall in capital flow volatility, such policies in the years of election are ineffective in curbing capital flow volatility. The paper adds to the increasing evidence coming in recent years of the link between political cycles, interest groups and macroprudential policies.

中文翻译：

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政治稳定性和基于货币的宏观审慎措施的有效性

印度中央银行印度储备银行使用多种基于货币的宏观审慎工具，帮助建立了经济弹性，尤其是在金融动荡期间。然而，在像印度这样的民主体制中，对基于资本的宏观审慎改革的分析需要结合政治稳定性，因为越来越多的证据表明宏观审慎政策的有效性与政治条件密切相关。本研究通过使用选举年数作为政治不确定性的代理来理解政治稳定的作用是了解基于货币的宏观审慎政策的有效性。我使用印度储备银行的资本流动通知和外汇敞口风险管理指南开发了一个基于资本的宏观审慎政策 (CMPP) 指数。使用GARCH模型，分析了CMPP对1997年1月至2018年3月期间资本净流入的影响。我发现虽然CMPP的存在导致资本流动波动率下降，但这些年的此类政策选举对抑制资本流动波动无效。这篇论文补充了近年来越来越多的证据表明政治周期、利益集团和宏观审慎政策之间存在联系。