*Department of Commerce, Delhi School of Economics, Delhi University.
The paper examines different forms of monetary models of exchange rate determination for the Indian Rupee-U.S. dollar exchange rate for the period spanning 1971 to 2004. The study also analyses the models separately for the pre liberalization and post liberalization periods. Augmented Dicky-Fuller test and Phillip-Perron test are used for checking the stationarity of the variables and Ordinary Least Square (OLS) technique is used for the purpose of estimation. The empirical findings support the partial adjustment model for the entire period as well as the pre liberalization period. But after liberalization, the naive static form of the models has been found to perform better. Structural break is indicated in the exchange rate movements the breaking point being the liberalization process of 1991. Short run and long run elasticities have also been computed but none of the models show unit elasticity of the relative money supply. However, the elasticity (short run as well as long run) with respect to relative income variable is the highest in all the models.
