New Series / Volume 11, Nos. 1 and 2 Combined /
January - July 2013
Old Series/ Volume 27, Nos. 1 and 2 Combined / January - July, 2011
- Front Page
- How Can Long Memory in Volatility be Eliminated in Portfolio Optimization: An Empirical Evidence Using Copulas
- A Class of Semiparametric Ordinary Ridge Estimators of Regression Coefficients
- A Study of Volatility Spillover across Select Foreign Exchange Rates in India Using Dynamic Conditional Correlations
- The Taylor Curve and the Output Growth-Inflation Trade-Off: Evidence from DCC-GARCH Models
- Inferring India’s Potential Growth and Policy Stance
- Budgetary and External Imbalances Relationship: A Panel Data Diagnostic
- Multivariate Granger Causality between Financial Development, Investment and Economic Growth: Evidence from Tunisia
- Assessing the Intensity of US-Latin American Market Comovements and Contagion Effects in Times of Crisis
- Productivity Measurement in Indian Manufacturing: A Comparison of Alternative Methods
- Decomposition of Income-Related Inequality in Educational Performance: Evidence from India
- Labor Mismatch, Skill Obsolescence and Unemployment Persistence
- Relationship between Macroeconomic Variables and Corporate Health of Manufacturing Firms in India
- Macro Impact of Financial Integration: An Empirical Study of Pre and Post Liberalized India
- Why are Positive Attitude and Wage Correlated? The Role of Productivity Re-Examined
- Finance, Development and Economic Growth in BRICS: A Panel Data Analysis
- Modelling the Growth Process as a Virtuous Cycle
- Ecological Limits and Economic Development Creating Space (by Ramprasad Sengupta)
- Monetary Governance in Search of New Space: Emerging Market Economy Perspectives(by A. Vasudevan)
- Agricultural Prices in a Changing Economy – An Empirical Study of Indian Agriculture (by Munish Alagh)
Author(s): Hela Mzoughi and Faysal Mansouri
Abstract: This paper focuses on the analysis of long-memory properties of copula-based time series. We empirically investigate the relation between copulas parameter modeling temporal dependence and dependence structure, using simulated and financial series. Our results prove the existence of a positive relation relying two Markov process X_t+h and Y_t+h to their dependence structure.
Author(s): Huansha Wang
Abstract: In this article, a class of easy-to-implement semiparametric ordinary ridge estimators of regression coefficients is introduced. Their properties are investigated and simulation results are provided to investigate their behaviors when the error variances are small and relatively large, respectively. The semiparametric estimators outperform the Hoerl, Kennard and Baldwin (1975) estimator in the sense that they give less risk (total mean squared error). An empirical application is also presented.
Author(s): Anuradha Patnaik
Abstract: Foreign Exchange market in India has become extremely dynamic, post the shift to managed float from a basket peg in the 1990s. The present study therefore attempts to estimate a multivariate GARCH model involving exchange rates of the Indian rupee vis a vis four prominent foreign currencies. Through the Dynamic Conditional Correlations (DCC) derived from the Multivariate GARCH model, a measure of the spillover of volatility across these exchange rates is attempted. The results of empirical estimation depict the prevalence of very high level of volatility and volatility clustering in each of these exchange rates. So also the volatility spillover interpreted from the behavior of the DCCs amongst these rates, is evident and asymmetric over a period of time. As a result only short term policy actions can be framed using these DCC.
Author(s): Samira Haddou
Abstract: This paper uses the dynamic conditional correlation model developed by Engle (2002) to investigate the synchronous/asynchronous movements of growth rates and inflation as well as their uncertainties in Tunisia. This methodology has the advantage of taking into account the non-constancy of the volatility of macroeconomic aggregates caused by the multiplicity of the exogenous shocks, especially for small open economies. It has been shown, using a bivariate GARCH model over the period 1990:Q1–2009:Q4, that the dynamic correlation exhibits relatively strong negative link, while there is a bidirectional causality in level running from economic growth to inflation in variance. The paper finds also evidence in support of the Taylor (1979) hypothesis that there is a long-run tradeoff between the inflation and the growth.
Author(s): Ashima Goyal and Sanchit Arora
Abstract: We propose an alternative method to infer potential growth, and use it to derive the Indian monetary policy stance based on estimated linear and Markov switching policy rules. We define growth to reach potential if a second round pass through of supply shocks to inflation occurs. Growth reached potential only in 2007-08 when growth exceeded 9 percent. Conventional measures of potential growth support the conclusions. Estimates with a two-variable Vector Auto Regression show multiple supply shocks, not second round effects, largely explain inflation. A one percent underestimate of potential output leads to a 25 basis point rise in policy rates.
Author(s): António Afonso, Christophe Rault and Christophe Estay
Abstract: We assess the cointegration relationship between current account and budget balances, and effective real exchange rates, using recent bootstrap panel cointegration techniques and SUR methods. We investigate the magnitude of the relationship between the two imbalances for each country and for different EU and OECD country groupings. The panel cointegration tests used allow for within and between correlation, between current account balances, budget balances and effective real exchange rates produce significant evidence in favour of the existence of a cointegration relationship. Still, SUR results show both positive and negative effects of budget balances on current account balances for several countries. The magnitude of the effects varies across countries.
Author(s): Helmi Hamdi, Abdelaziz Hakimi and Rashid Sbia
Abstract: The aim of this paper is to empirically examine the dynamic relationship between financial deepening, investment activities and economic growth for the case of Tunisia during the period 1961-2010. To this end, we use a multivariate framework based on Vector Error Correction Model and Cointegration techniques. The short-run estimation reveals that finance does not led to economic growth in Tunisia while the long-run results show the opposite conclusion. Further, it was shown that investment is the main engine of growth in the short-run and long-run as well. Our findings could be of great interest for Tunisia new government to draw proper policy responses to promote the role of the financial sector in the economy.
Author(s): Mohamed El Hedi Arouri, Amine Lahiani and Duc Khuong Nguyen
Abstract: We investigate the comovements and contagion effects between four emerging markets in Latin America and the US stock market using two multivariate volatility GARCH-based models: the DCC-GARCH and BEKK-GARCH models. A structural change analysis is also applied to detect the changing patterns in the cross-market dynamic linkages. Our results show that the DCC-GARCH model provides better in-sample estimates than the BEKK-GARCH model. We also find evidence of time-varying market comovement, but the results are inconsistent with higher comovements between these markets in recent years. Finally, the financial contagion hypothesis associated with the Mexican crisis of 1994, the Asian crisis of 1997-1998, and the global financial crisis of 2008-2009 is not supported by our data, in almost all cases.
Author(s): Vinish Kathuria, Rajesh S N Raj and Kunal Sen
Abstract: Very few other issues in Indian economic development has generated so much debate than the measurement of total factor productivity (TFP) growth in Indian manufacturing. This debate has intensified following the major economic reforms in 1991. Using three different techniques – growth accounting (non-parametric), production function accounting for endogeniety (semi-parametric) and stochastic production frontier (parametric) – the paper computes the TFP growth of Indian manufacturing for both formal and informal sectors from 1994-95 to 2005-06. The results indicate that the TFP growth of formal and informal sector has differed greatly during this period and that the estimates are sensitive to the technique used. This suggests that any inference on productivity growth in India since the economic reforms of 1991 is conditional on the method of measurement used, and that there is no unambiguous picture emerging on the direction of change in TFP growth in post-reform India.
Author(s): Rama Pal
Abstract: The present paper analyzes income-related inequality in educational performance of Indian children. Inequality in educational performance shows whether development in education sector is inclusive. We measure inequality in education using the concentration index for scores on standardized tests. Moreover, we use the regression-based decomposition analysis to understand the major contributors to inequality in educational performance. This decomposition analysis quantifies relative contributions of each factor to inequality in educational performance. This analysis is based on the data from the India Human Development Survey. The findings point out importance of parents’ education in determining educational performance of child. In particular, inequality in mother’s education is one of the major contributors to inequality in educational performance. We also find that economic status of family significantly affects educational performance of the child. Other factors contributing to inequality in educational performance are inequalities in father’s education, child health, social background of family, and some school characteristics.
Author(s): Sherif Khalifa
Abstract: This paper attempts to assess the impact of skill loss by both the unemployed and the mismatched workers on the persistence of unemployment. The observations show that the total unemployment rate is highly persistent, and that the persistence of the unemployment rate of the unskilled workers is higher than that of the skilled workers. A framework that features search frictions is developed, where workers are either high educated or low educated. Firms post complex and simple vacancies that can be matched with both the high and the low educated. The high educated lose their skills if unemployed, and if employed in simple occupations. A negative aggregate technological shock induces the high educated unemployed to compete with the low educated by increasing their search intensity for simple vacancies. As the high educated occupy simple vacancies, they crowd out the low educated into unemployment. This downgrading of jobs in a cyclical downturn, and the subsequent skill mismatch and obsolescence, allow the model to capture the observed unemployment persistence.
Author(s): Swayam Prava Mishra
Abstract: This paper aims at examining the link between macroeconomic variables and the corporate health indicator (in the form of Z scores) of the Indian manufacturing firms under BSE 200 during 1990 to 2009. The macroeconomic variables taken were the bank rate, GDP, inflation and trade openness. The long run relationships are identified using panel unit root test, panel cointegration analysis and panel long run causality. The findings of the study reveal the existence of a two-way causal relationship between the Z score and GDP, Z score and Bank rate, Z score and WPI and Z score and trade openness.
Author(s): Gargi Sanati
Abstract: In the context of India‘s financial integration in the domestic and international front, this study proposes to study three major issues: First, the impact of financial development on the real sector growth; second, examining relative merit of bank or market based economy in the pre and post liberalization period for the growth of the real sector economy and third, the long run relationship of the development of banking sector and market economy with the growth of the real sector economy. We find positive and significant effect of the financial sector development for the period of 1980-2008. However, India depends more on the bank industry in the pre-liberalization period while it is evident that stock market play a significant complementary role in the post-liberalization period. Our finding also supports the conventional theory that at the early stages of economic development, banking industry fosters economic growth to a greater degree than market-based financial system. Also, long run relationship is evident among the bank lending channel, stock market development and the real sector growth. Despite significant evidence of integration between real and financial sector we find it is the development of macro-economy which leads the growth of financial sector and the transmission of finance for the growth of real sector economy is not significant. However, as long run equilibrium is evident between bank lending channel and market channel, external shocks may have adverse impact on the growth of the Indian economy through the non-availability of finance. Since stock market movement is much sensitive to external shocks, in the event of crisis, the linkage may be proven costlier for the growth of the real sector economy.
Author(s): Madhu S. Mohanty
Abstract: By extending Solow’s input augmenting technological progress argument and Becker’s human capital accumulation argument to a cross-sectional framework, the study claims that the recent evidence of a significant positive relationship between the worker’s positive attitude and wage may be attributed partly to a positive correlation between attitude and productivity. To test this hypothesis, the study presents an econometric framework for obtaining an alternative measure of the worker’s productivity, a variable hardly available in current labor market data sets. Using this new variable and following alternative econometric techniques, the study tests the proposed hypothesis, and demonstrates that positive attitude in fact affects productivity positively. This finding implicitly suggests that any program designed to improve the worker’s attitude is likely to enhance his/her productivity and wage. Echoing suggestions of numerous earlier studies, the current study, with a view to improving the worker’s over-all economic performance, recommends psychological training for fostering behavioral skills to supplement traditional schooling that promotes cognitive skills only.
Author(s): Rudra P. Pradhan, Prateek Dasgupta and Samadhan Bele
Abstract: The paper examines the nexus between financial development and economic growth by using panel data vector autoregression. Using five BRICS countries (Brazil, Russia, India, China and South Africa), the study finds bidirectional causality between financial development and economic growth. The policy implication of this study is that the economic policies should recognize the finance-growth nexus in order to maintain sustainable development in the economy.
Author(s): W Robert J Alexander
Abstract: The standard neo-classical model of economic growth entails a rate of income growth proportional to the income gap yet, in the most dramatic periods of economic transformation, a process of cumulative circular causation could be expected to lead to accelerating growth. Modelling the rate of change of income growth, instead of income growth itself, as proportional to the income gap gives testable predictions concerning the inverse cosine of the income gap. Estimates of real GDP per capita for six Western European nations, for which GDP data are available over the period 1830 to 1913, conform to these predictions.
Author(s): Pinaki Chakraborti
Author(s): Ganti Subrahmanyam
Author(s): Sebastian Morris