Abstract
Verifiability of an announced exchange rate regime becomes important in the context of credibility and transparency of a regime. These latter ideas become especially significant in the context of the currently reigning hypothesis of the missing middle, which postulates that exchange rate regimes intermediate to the corner regimes of ‘free floating’ and ‘firm fixing’ are increasingly becoming nonviable in a world of greater international capital mobility as these intermediate regimes are more difficult to verify. This paper attempts to verify India’s exchange rate regime in the so-called basket arrangement period. Using auxiliary information about the regime, it estimates the confidential Indian basket and shows that the behaviour of India’s exchange rate was not exactly as per the announced regime.
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