New Series / Volume 10, No. 1 /
Old Series/ Volume 26, No. 1/ January, 2010
- Front Page
- Speed of Adjustment and Inflation-Unemployment Tradeoff in Developing Countries -- Case of India
- Construction of Leading Index of Indian Economy: A Weighted-Cumulative Density Function Approach
- Efficient Semiparametric Instrumental Variable Estimation under Conditional Heteroskedasticity
- A Note on Estimation in Seemingly Unrelated Semi-Parametric Regression Models
- Asymmetric Fractionally Integrated Volatility Modelling of Asian Equity Markets under the Subprime Mortgage Crisis
- Firm Specific Monopoly Power in Differentiated Oligopoly
- On the Relationship between World Oil Prices and GCC Stock Markets
- ASEAN-India Economic, Trade and Integration Relations: Modelling the Challenges and Opportunities
- Asset Sales by Manufacturing Firms in India
- Global Crisis, Environmental Volatility and Expansion of the Indian Leather Industry
- Long Run and Short Run Linkages between Stock Indices in Bombay Stock Exchange: A Structural Cointegration Approach
Author(s): Ravindra H. Dholakia and Amey A. Sapre
Abstract: This paper estimates the short-run aggregate supply curve for the Indian economy over the period 1950-51 to 2008-09. Methodological improvements in this paper include the technique of estimating adaptive expectations, constrained estimation consistent with long run equilibrium, and introduction of the extended Phillips curve. The study also attempts to investigate the question of speed of recovery and the choice of adjustment paths available to policymakers in face of adverse supply shocks. Contrary to previous studies, the present study finds a regular tradeoff between inflation and output or unemployment with inflationary expectations based on the experience of past three to four years. We also find that the subtle tradeoff between the rate of output recovery and inflation is negative in India thereby implying that a strategy of fast recovery is not likely to result in high inflationary pressures.
Author(s): Indrajit Roy and Dipankar Biswas
Abstract: This paper constructs a composite index of leading indicator (CILI) for the monthly Index of Industrial Production (IIP) of Indian Economy, using large number of important economic indicators exhibiting leading capability to the target series. These indicators are transformed to percentile-scores by using empirical cumulative density function and CILI is constructed as weighted average. The weights are calculated using linear regression of the target series on the lag values of the individual indicators; thereafter, adjusted R-square values are used as the respective weights. The CILI was constructed based on both growth cycle (using Hodrick-Prescott Filter, and the frequency filters viz., Baxter-King, Christiano-Fitzerald Filters), as well as growth rate cycle techniques. It is observed that, the CILI based on growth rate cycle tracked the movement of IIP cycle well, as compared to the growth cycle method.
Author(s): Feng Yao
Abstract: We consider the estimation of a semiparametric regression model where the data is independently and identically distributed. Our primary interest is the estimation of the parametric vector, where the associated regressors are correlated with the errors, contain both continuous and discrete variables, and the error term is conditionally heteroskedastic. Under general conditional heteroskedasticity that depends on both excluded and included exogenous variables, we propose a new estimator based on Yao and Zhang's (2011, Efficient semiparametric instrumental variable estimation, working paper, Economics Department, West Virginia University) framework and establish its asymptotic properties. It is consistent and asymptotically normally distributed. It allows the reduced form to be nonparametric and is efficient as it reaches the semiparametric efficiency bound. Furthermore, it is asymptotically equivalent to a GMM estimator that optimally select the instrumental variables with conditional moment restriction, and thus is also efficient among a class of semiparametric IV estimators. We perform a Monte Carlo study, which illustrates its finite sample properties and confirms our theoretical result.
Author(s): Radhey S. Singh and Lichun Wang
Abstract: In this paper a system of two seemingly unrelated semi-parametric regression models is considered, in which, following the partial residual procedure, we first show that the weighted least squares estimator (WLSE) of the regression parameter from the system can be expressed as a matrix series. Then this estimator is shown to be the limit of the covariance-adjusted estimator sequence of the regression parameter. Furthermore, based on the matrix series, we prove that the WLSE actually has only one unique simpler form, which exactly equals to the one-step covariance-adjusted estimator of the regression parameter. We also show that when the variance-covariance matrix of disturbances is unknown, the corresponding two-stage WLSE too has exactly one simpler form, and for any finite k ≥ 2, the k-step covariance-adjusted estimator degenerates to the one-step covariance-adjusted estimator. Finally, we generalize our above conclusions to the system of m(m ≥ 3) seemingly unrelated semi-parametric regressions and point out that the conclusions presented in this paper include the system of m(m ≥ 2) seemingly unrelated linear regressions as its special case.
Author(s): Chin Wen Cheong, Ng Sew Lai, Nurul Afidah Mohmad Yusof and Khor Chia Ying
Abstract: The fractionally integrated asymmetric power autoregressive conditional heteroscedasticity model has successfully captured the empirical stylized facts such as the leverage effect, power transformation and long memory in the foreign exchange markets. This study further explores the applicability of this model in the Asian equity markets under the impact of the 2008 United States subprime mortgage crisis. The empirical stylized facts of the markets are examined before and after the Lehman Brothers filed for bankruptcy protection in year 2008. The important findings of this empirical study are as follows: First, majority of the Asian equity markets are more appropriate in conditional variance representation than conditional standard deviation based on their power transformation results. Second, all the equity markets' leverage effect and magnitude appear to increase after the failing of the Lehman Brothers. Third, most of the long memory volatility intensities have the tendencies of declining across the crisis periods. From the explanation of heterogeneous market hypothesis, majority of the Asian mature markets become more efficient after the bankruptcy of Lehman Brothers whereas emerging markets with no direct investment may be affected by other factors such as political crisis or domestic economic issues and appeared to indicate fluctuating and descending long memory.
Author(s): T.V.S. Ramamohan Rao
Abstract: In the context of differentiated oligopoly the monopoly power of any one firm is determined by its ability to develop non-price strategies while taking the reactions of the rivals into account. However, in current practice, estimates of firm level monopoly power account for only differences of prices over costs measured in different ways. Further, these differences are always attributed to the demand conditions and the associated elasticity of demand for the differentiated products. That is, it is presumed that firms maximize their profits based on margins rather than volumes or other aspects that shift their demand curves. By way of contrast, the present study acknowledges that the elasticity of demand per se may not be the only source of monopoly power. Hence, an attempt has been made to develop an empirical procedure to identify firm specific monopoly power incorporating non-price dimensions.
Author(s): Mohamed El Hedi Arouri, Jamel Jouini, Nhu Tuyen Le and Duc Khuong Nguyen
Abstract: We provide comprehensive evidence on the relationship between oil prices and stock markets for six GCC countries. Unlike previous contributions, a wide range of modern econometric techniques are applied in order to: i) capture both short- and long-term interactions between considered markets; ii) deal with the potential asymmetry in such interactions, and iii) control for the effects of relevant global financial variables. Empirical results show strong causal linkages in the short-run with the impact direction running usually from oil to stocks, but no long-run links based on standard cointegration analysis. Stock returns seem also to be more sensitive to negative than to positive oil shocks. Using the autoregressive distributed lags model as a robustness check for cointegration results, we find several significant cointegrating relationships between oil and stock prices.
Author(s): Tran Van Hoa
Abstract: The paper provides a rigorous analysis of ASEAN-India economic, trade and integration relations and presents evidence-based scenarios and policy options for improving these relations in the context of `Look East' policy, `economic diplomacy', globalisation and post-global financial crisis. The proposed options are robust in the sense of statistical efficiency and credible as meeting the Friedman (1953) and Kydland (2006) data-consistency criterion. Several plausible regional and global scenarios to accommodate major opportunities and the challenges for India vis-a-vis the ASEAN will be proposed for evaluation.
Author(s): Vikash Gautam
Abstract: In this paper we study 325 large scale asset sale transactions by Indian manufacturing firms in the period 1996 to 2008. We find that the likelihood of asset sales increases with the firm's low capacity of debt utilisation and decreases with size, profitability, operating performance and solvency. We also find that the performance of firms after they sell assets do not improve in profitability, solvency or operations. The only difference the episodes of asset sales make is some reduction in leverage. We contrast with the existing episodes of asset sales in developed countries as the performance of firms there, after they sell assets, improves in all parameters.
Author(s): Anup Kumar Bhandari
Abstract: Indian leather industry has massive potential for generating employment and achieving high export-led growth. However, the on-going global economic peculiarities pose both threat (of market loss) and opportunity (to gain some unanticipated demand in the market) before it. On the other hand, its economic performance has not been assessed much till date. The present paper makes some policy prescriptions regarding the expansion of the industry by examining technical efficiency (TE) as well as scale efficiency of individual leather producing firms for some selected years since the early-1980s. Analysing the data through the Data Envelopment Analysis the paper observes a significant positive association between a firm's size and its TE. On the other hand, our analysis does not show any conclusive evidence for the majority of the firms whether they are either too small or too large relative to the most productive scale size (MPSS) of the respective years. Considering the possible demand side effects on the industry to be exogenous, analysing the relevant supply side factors the paper suggests the policy makers to go forward in expanding the industry, particularly keeping India's severe unemployment problem, of both skilled as well as unskilled labour forces, in mind.
Author(s): Suresh K G and Aviral Kumar Tiwari
Abstract: We have analyzed the short term and long term linkages between the sectoral indexes of Bombay Stock Exchange in India by using the daily data on nine sectoral indexes for the period 23rd August 2004 to 31st June 2010. After confirming the same order of integration of the study variables from the unit root test incorporating endogenously determined structural breaks, structural cointegration test has been carried out followed by VECM , Impulse response functions and variance decomposition analysis. The cointegration analysis results indicate that most of the sectoral indexes in India are cointegrated with at least one of the other indexes indicating that the sectoral indexes posses useful information about the movements of other indexes. This is confirmed by the Impulse response function analysis also. The comovements between the sectoral indices indicate that the Bombay stock exchange is not weak form efficient and the possibility of sectoral portfolio diversification is limited.