Global Financial Shocks

Dr. Udupa and his co-authors find that Indian importers face difficulties due to extreme financial shocks to their foreign partners. They show that taper tantrum episode during May-September 2013, when a surprise US Fed announcement reduced supply of dollars globally, resulted in reduction in import transactions for Indian importers. Firms’ inability to find alternate currencies to make purchases was the primary cause; and firms which could not arrange dollars from alternate sources were more affected.