In the opinion of the public, more inflation and more credit expansion are the only remedy against the evils which inflation and credit expansion have brought about.” 5 The idea that the recent financial crisis can be traced back at least partly to monetary policy excesses at the global level at the beginning of the decade has found some support in the empirical literature.
While we have an all time high foreign exchange reserves of more than $ billion, high capital inflows pose a big challenge to monetary and exchange rate management. In this context, operationalisation of Market Stabilisation Scheme (MSS) has given an additional instrument for liquidity and monetary management. To sum up the challenge, I would like to quote a statement of Dr. Y.V.