Gupta, Rangan2008-05-262008-05-262007Gupta, R 2007, 'Financial liberalization and the dynamics of inflation, nominal exchange rate and terms of trade', Indian Economic Review, vol. 42, no. 2, pp. 165-176. [http://www.ierdse.org/]0019-4670http://hdl.handle.net/2263/5524The paper develops a short-run structural model of a small open financially repressed economy with current account convertibility. The analysis shows that the effect of financial liberalization on rate of inflation and the movements of the nominal exchange rate proves ambiguous, and hinges critically on the relative responsiveness of the credit-induced effects on aggregate demand and aggregate supply. This result provides a theoretical explanation to the widely available empirical evidence, indicating such an ambiguity.11637 bytesapplication/pdfenDelhi School of Economics, University of Delhi. Copyright has not been cleared yetFinancial liberalizationInflationExchange rateTerms of trade dynamicsSmall open economyInflation (Finance)Foreign exchange ratesTerms of tradeArticle