New Series / Volume 12, No. 1 /
Old Series/ Volume 28, No. 1 / January, 2012
- Front Page
- Fiscal Policy as an Instrument of Investment and Growth
- Incumbency Effect in the Indian Parliamentary Elections, 2004 and 2009: A Regression Discontinuity Approach
- Adjustment of Inputs and Measurement of Time-varying Technical Efficiency: A Dynamic Panel Data Analysis
- Macroeconomic Determinants of Private Transfers to India
- Neoclassical Characterization of Returns to Scale in Nonparametric Production Analysis
- Economic Growth and Income Inequality: Examining the Links in Indian Economy
- An Empirical Examination of the Process of Information Transmission in India’s Agriculture Futures Markets
- Is the Indian Capital Market Integrated with Major Developed Economies? Evidence Using Long Memory Approach
- Will the Devaluation of the Rand Improve South African Competitiveness?: An Empirical Investigation for the Short- and Long-Run Periods
- An Empirical Study of the Interrelationships, Integration and the Efficiency of Stock and Foreign Exchange Markets in Fiji
- Real Exchange Rate Effects on Output in India
- The Future of Indian Agriculture (by Yoginder K. Alagh)
- Indian Stock Market: An Empirical Analysis of Informational Efficiency (by Gourishankar S. Hiremath)
- A Tribute to Professor A.L. Nagar
- A Tribute to Professor Debesh Chandra Chakraborty
Author(s): Kaushik Basu
Abstract: This paper investigates the role of fiscal guarantees in promoting infrastructure investment. Infrastructure is a critical driver of economic growth, but infrastructure entails significant up-front costs that yield benefits after a time lag. Investors hesitate to put their money down on private infrastructure ventures because of the long lag and governments do not give guarantees for reasons of fiscal prudence. The paper argues that governments and large investment guarantee agencies can in many situations give suitably-calibrated guarantees to private projects by exploiting the fact that a guarantee on one project can reduce the risk of another one failing. The paper works out the architecture of such guarantees, which can be fiscally prudent and yet boost investment, especially in infrastructure, and thereby promote growth.
Author(s): P. Duraisamy, Bertrand Lemennicier and Michele Khouri
Abstract: The paper examines the effect of incumbency status of a contestant on the chances of winning and the margin of victory in the Indian parliamentary elections 2004 and 2009, a topic of keen interest not only to political parties but also to the electorate. The study uses a non-parametric approach namely, Regression Discontinuity (RD) design which is considered to be a better methodology when data on covariates of the election outcomes are inadequate. The empirical results based on RD design suggest that the incumbency factor adversely affected the likelihood of winning the election by 26% in 2004 and 10% in 2009. The incumbents’ margin of victory was also 5% and 7% lower than that of non-incumbents in the last two elections in India.
Author(s): Aditi Bhattacharyya
Abstract: This paper provides estimation method to measure technical efficiency of production units and the speed of adjustment of output, both varying with time, from a dynamic stochastic production frontier that incorporates the sluggish adjustment of inputs. Using a panel dataset on private manufacturing establishments in Egypt, I find that the speed of adjustment of output is lower than unity in every period and slowly increases over time. When compared to the results from the static model, the dynamic model is found to produce higher estimates of technical efficiency on average, captures more variation in the time pattern of technical efficiency, and provides a different ranking of production units.
Author(s): Pushpa Trivedi and Devi Prasad Panda
Abstract: After the implementation of economic reforms in 1991, private transfers to India have played a major role in financing the trade deficits and reducing the current account deficits. Most of the studies find that host country 3macro-economic (push) factors play a more important role as compared to the home country macro-economic (pull) factors in determining the magnitude of private transfers. This study, covering the period from 1991-92Q4 to 2010-11Q4, examines various macroeconomic determinants of private transfers to India. While GDP of USA and Dubai Crude Oil prices are taken as proxies for the host-country macroeconomic factors, US $-INR bilateral nominal exchange rate and all India average CPI for industrial workers have been taken as proxies for the home country macroeconomic factors. The study conducts an econometric investigation by applying methodologies, viz., (i) Stationarity Tests; (ii) Johansen’s Cointegration Test; (iii) Johansen’s Vector Error Correction Model (VECM) in VAR; and, (iv) Impulse Response Function and Variance Decomposition Analysis. With all the variables in log terms being I(1), Johansen’s cointegration test confirms two long run relationships among the variables at 5% significance level. The Vector Error Correction Model (VECM) indicates that while private transfers may temporarily deviate from its long run equilibrium, the deviations adjust towards the equilibrium level in the long run. The elasticity of private transfers with respect to GDP of USA, Dubai crude oil prices, US $-INR bilateral nominal exchange rate and All-India CPI for industrial workers is found to be significant, which shows that both host as also home country macroeconomic factors have influenced the magnitude of private transfers to India.
Author(s): Biresh K Sahoo and Jati K. Sengupta
Abstract: From an empirical perspective, this paper critically examines the concepts of returns to scale (RTS) and economies of scale (EOS), and argues that the concept of EOS is more relevant and broader enough to exhibit proper scale economies behavior of firms. Two approaches, i.e., production function and total cost function are available in the literature that are generally taken to be a satisfactory way of empirically verifying scale economies behavior of firms without mentioning whether they are taken exhibit the same causal factors. As argued in this paper that because of the fundamental shortcomings associated with the production function approach where output is narrowly related to the inputs only by defining the input-mix in a special way, the concept of RTS seems to be very restrictive in exhibiting any relevant scale behavior. By exercising prudence in pending more thorough exploration of the sources of scale increases; a strong case is made in this paper supporting the use of a nonparametric cost frontier approach to estimate scale economies behavior.
Author(s): Samarjit Das, Gouranga Sinha and T.K. Mitra
Abstract: In this paper we attempt to examine the Kuznets’ U curve hypothesis with balanced panel data of Indian states using two-way fixed effects model. From the findings, it is evident that Gini coefficient shares a positive relationship with real economic development measured by per capita real consumption expenditure. It also supports the hypothesis. Unidirectional causality is found from economic development to inequality.
Author(s): Sanjay Sehgal, Wasim Ahmad and Florent Deisting
Abstract: This study examines the process of information transmission in India’s agriculture commodity futures market by investigating the price discovery and directional volatility spillovers between futures and spot prices of nine agricultural commodities viz., Barley, Cardamom, Castor seed, Chana (Chickpea), Chili, Mentha oil, Pepper, Soybean and Refined Soya, traded on Multi-Commodity Exchange (MCX) and National Commodity & Derivatives Exchange (NCDEX). The study uses the daily data from January 01, 2009 to May 31, 2013. The empirical results confirm the price discovery between futures and spot prices, indicating strong information transmission. The volatility spillover results indicate that in the short-run, there is strong volatility spillover from spot to futures market whereas in the long-run it is exactly opposite. Further, the study applies the directional spillover method pioneered by Diebold and Yilmaz (2012) to analyze the direction of informational spillover. The estimated results suggest that the magnitude of volatility based information spillover is low in agri-futures market. With the exception of Soybean and Refined Soya, the spillovers are basically intra-commodity and not inter-commodity .Finally, the study concludes that India’s agriculture commodity derivatives market is evolving in the right direction as futures market has started playing pivotal role in the information transmission process.
Author(s): Aviral Kumar Tiwari and Amrit Chaudhari
Abstract: The present study attempts to examine the existence of long run diversification benefits of investment allocation in Indian Stock Market with that of the Developed World by using daily data of closing stock prices for the period 1997 to 2011 and applying a modified GPH test, along with a battery of other tests such as KPSS, GPH and the Rescaled Range. The study revealed conflicting results: the powerful GPH test indicated long memory, while the earlier generation of tests pointed towards its absence. The results indicate the existence of fractional cointegration of Indian Stock Market with the Developed world and hence absence of diversification benefits for the selected markets in the long run.
Author(s): Olivier Niyitegeka and D.D.Tewari
Abstract: The strength of the rand has raised fears among policymakers, labour unions, and exporters, who argue that a strong rand makes local goods relatively more expensive than foreign goods and that this negatively affects South Africa’s competitiveness. This study empirically investigates the relationship between the trade balance, domestic income, foreign income and the bilateral real exchange rate by employing the Autoregressive Distributed Lag (ARDL) approach to cointegration. The results from the ARDL model suggest that the devaluation of the rand does not have a positive impact on South Africa’s trade balance. Therefore the arguments put forward by policymakers, labour unions and exporters have no foundation. The recent weakening of the rand and its impacts on the economy confirm this assessment.
Author(s): Muthucattu Thomas Paul and Timiti Uriam
Abstract: This article attempts to examine the integration and efficiency of the pacific country Fiji’s stock and foreign exchange markets. The study employed, Unit Root test, Cointegration and Error correction models, and the VEC Grangers causality test, using the daily data of FJ$/USD $, and Fiji’s market capitalization index (stock market), from 3rd August 2010 to 10th July 2012. The level form data follows the unit root time series process , and the difference form, and return form data follow stationary process .This broadly supports the ‘weak form efficient market’ hypothesis. However, the market capitalization index, and FJ$/US$ rates are cointegrated. The cointegrating coefficient of the FJ dollar is positively related to the market capitalization index, and therefore, the FJ dollar appreciation stimulates the Fiji market capitalization index. This is perhaps the first scientific research which shows that for the small open Pacific economy of Fiji, a strong currency supports the stock market by encouraging a low inflation environment and therefore there may be some merit in the argument for aligning to strong neighboring currency of Australian dollar. The changes in the market capitalization index is related to the long run trend factors in FJ dollar index as revealed in the error correction model. The return data of FJ dollar, do not Granger cause the return data of the Fiji stock market return in the short run with out an error correcting factor equation and vice versa as well. This supports the semi strong form of efficient market hypothesis, though more studies on markets integration are recommended by us, and we recommend more policy intervention to create more liquidity and depth in Fiji stock markets.
Author(s): Soubarna Pal
Abstract: In this paper we model real per capita GDP growth for India as a function of real exchange rate, inflation and US interest rates, foreign exchange reserves and government expenditure. We find evidence of non-linearity in this relationship and we capture that through a smooth transition regression model. Using annual data for the period 1970-2006, we find that depreciations may have negative effects on growth and appreciations may have positive effects on growth. These results support the existing literature.
Author(s): V. Ratna Reddy
Author(s): Poonam Singh
Author(s): Aman Ullah
Author(s): Partha Pratim Ghosh and Kakali Mukhopadhyay