ScienceGuy

Dollar currency paradigm means that dollar matters a lot in global trade. So suppose, India and Brazil are involved in a bilateral trade whereby India buys oil from Brazil while Brazil buys pharmaceutical drugs from India.

India is a net importer of energy, with High-Speed-Diesel playing a central role in India’s energy dynamics. Due to this, diesel prices were passed in a controlled manner and distributed asymmetrically between favourable and unfavourable shocks.

With increased world integration there was a need to study the transmission of policy in one part of the world to other country's.

The monetary model is better for a long run explanation of exchange rates. It assumes full employment with flexible prices. Furthermore, real income can be exogenously decided which determine the demand for real balances.

Ironically as the Rupee started to weaken, the politics started to heat up with politicians restarting their age-old blame game.