New Series / Volume 8, No. 1 /
Old Series/ Volume 24, No. 1/ January, 2008
- Front Page and CONTENTS:
- Capacity Output and Cycles in Non-agricultural Output of the Indian Economy
- Application of the Quaids Model to the Food Sector in India
- Normality of Indian Crop Yields: Application of Panel Analysis
- Nonlinear Dependence in Stock Returns: Evidences from India
- Modeling Volatility in Emerging Stock Markets Of India And China
- Initial Allocation of Emissions Permits in the Two-Sided Matching Framework
- A Variance Ratio Test of Random Walk in Energy Spot Markets
- Study of Inflation in India: A Cointegrated Vector Autoregression Approach
- Export-Led Growth Hypothesis: Evidence from Pakistan
- Impact of Restrictive Trade Policy on Adult Unemployment, Welfare and the Incidence of Child Labour -A Three Sector General Equilibrium Analysis
- A Note on the Basic Lemma of the Linear Identification Problem
- Deena Khatkhate "Money, Finance, Political Economy- Getting It Right," Academic Foundation, New Delhi, 2009, Pp. 385, Price Rs.995/- : Review By Errol D'souza
- Anand Chandavarkar "The Unexplored Keynes And Other Essays" ASocio-Economic Miscellany," Academic Foundation, New Delhi, 2009, Pp. 346, Price Rs.995/- : Review By Errol D'souza
Abstract: We estimate capacity output and cycles relative to it in India's non-agricultural sector from 1951 to 2008, defining capacity as the level of output beyond which demand leads to a rise in prices. We postulate a delayed response of the price level of non-agricultural goods and services after demand exceeds capacity output, and use a VAR involving growth rate of non-agricultural output and inflation to estimate underlying structural demand and supply shocks. We estimate the structural parameters of the model, treating them as unknown polynomial functions of the lag operator rather than as scalars. We identify nine cycles in India's non-agricultural output. Capacity utilisation in non-agricultural sector, while showing the above-mentioned cycles, has declined till 1979 and increased thereafter.
Author(s): Surabhi Mittal
Abstract: Higher economic growth has led to diversification of the consumption bundle of households away from staple food. This has implications for the food policy as demand projections for different commodities impacts the farmers decision to diversify its production base which further has implications for the issue of food security. Thus it becomes important to project the demand, based on most realistic demand elasticities. Using the households' consumer expenditure survey of the major National Sample Survey rounds, the paper estimates the price and expenditure elasticities of different food items/ groups in India. A two-stage Quadratic AIDS (QUAIDS) model is used to compute coefficients and calculate the demand elasticities. In this model assumption of linearity in the expenditure function is given away.
Author(S): Saleem Shaik
Abstract: This paper has two-fold contribution. First, normality of the crop yield residuals are examined using panel statistical procedures accounting for trend, autocorrelation and heteroskedasticity. Second, to evaluate the importance of accounting for spatial and temporal variation on the normality of crop yield residuals, the changes in the skewness, kurtosis and D'Agostino-Agostino Pearson(K2 ) omnibus normality test across panel and time-series models are examined. These are examined with an empirical application to district level data from 1950-2002 for 15 crops and 14 states in India composed of a total of 3143 individual reporting districts in India. Results indicate crop yield residuals were normally distributed in 65 percent and 73 percent of districts, respectively based on skewness and kurtosis statistics. Accounting for spatial and temporal variation seems to change the distribution of crop yield residuals in 20 percent, 14 percent and 17 percent of districts based on skewness, kurtosis and omnibus tests respectively.
Author(S): Gourishankar S Hiremath And Bandi Kamaiah
Abstract: This paper examines non-linear dependence in Indian stock returns using a set of non-linearity tests. The daily data between 1997 and 2009 for eight indices from National Stock Exchange (NSE) and six indices from Bombay Stock Exchange (BSE) are used. The results suggest strong evidence of non-linear structure in stock returns. The non-linear dependence, however, is not consistent throughout the sample period as indicated by windowed Hinich test [1996, Journal of Non-parametric Statistics, 6, 205-221] suggesting episodic nonlinear dependence in Indian stock returns. The existence of episodic non-linear dependency is associated with events such as uncertainties in international oil prices, sub-prime crisis followed by global economic meltdown, and political uncertainties among others.
Author(S): Prashant Joshi
Abstract: The study investigated the stock market volatility in the emerging stock markets of India and China using daily closing price from 1st January, 2005 to 12th May, 2009. The results detect the presence of non-linearity through BDSL test while conditional Heteroscedasticity is identified through ARCH-LM test. The findings reveal that the GARCH(1,1) model successfully captures nonlinearity and volatility clustering. The analysis suggests that the persistence of volatility in Chinese stock market is more than Indian stock market.
Author(S): Amlendu Kumar Dubey
Abstract: For the initial allocation of emissions permits, auctioning has been theoretically the most preferred allocation mechanism; but to attract the participation of polluting industries these permits have been generally grandfathered. Following two-sided matching literature, we model an auction market for emissions permits as a two-sided matching procedure and based on the objectives of all the players, characterize a set of stable matching rules that lead to the core allocation. We show that matching based allocation mechanism retains the essence of grandfathering by keeping the reservation price for permits at zero, by giving firms more maneuvering space in auctioning and also by rewarding more environmentally efficient firms and are thus more suitable for the emissions markets.
Author(S): Chin Wen Cheong
Abstract: This study tests the random walk hypothesis in the spot prices of the petroleum products markets. Under the variance ratio test, a less restrictive random walk process namely the martingale process is examined over the period 1998-2008. The variance ratio methodology is capable of providing information regarding the linearity of multi-period variances, serial correlation as well as possible conditional heteroscedastic effect in the selected spot markets. Due to the long spanning daily data, CUSUM and Andrews tests of structural change are conducted to avoid any possible misleading statistical inferences caused by the unstable parameter in the spot markets. Our empirical findings can be summarized as follows: (1) All the energy markets reject the independent and identically distributed random walk; (2) The WTI crude oil spot prices evidence the presence of autocorrelation and conditional heteroscedastic increments; (3) The Brent crude oil and New York Harbour conventional gasoline spot prices provide strong evidence of conditional heteroscedastic increments martingale process. As a conclusion, although the energy resources returns are martingales, the heteroscedastic increments can still be used to measure the market risk and to earn a risk-adjusted abnormal return in the energy spot markets.
Author(S): Anuradha Patnaik
Abstract: The spate of persistent inflationary pressure experienced in the post liberalization era in India throws light on the fact that the causes of inflation in India have undergone tectonic changes. The present study therefore aims at empirically identifying the determinants of inflation in India. In a Cointigrated Vector Autoregression (VAR) framework, the empirical estimation is carried out. The Error Correction Mechanism (ECM) of the cointegrated variables is also carried out. The Impulse Response Function (IRF) of the cointegrated VAR system shows that there is a lag in the response of inflation to the changes in the other variables in the VAR system. The Fixed Error Variance Decomposition (FEVD) shows that, the inflation in India is a mix of demand and supply side factors. The stabilization policies should therefore focus on both demand control as well as supply management. Also considering the lag in the impact of the explanatory variables the stabilization policies should become more pro-active.
Author(S): Mohammad Afzal and Ijaz Hussain
Abstract: The relationship between economic growth, exports and imports in Pakistan from1990Q1 to 2008Q1 has been examined. Economic growth and exports are not cointegrated suggesting the absence of long-run relationship. Causality in Granger’s sense is absent between economic growth and exports as well as between imports and economic growth. Impulse response functions show that income, exports, and imports have negative impact on each other. Variance decomposition analysis demonstrates that imports appear to have a stronger impact on exports relative to income. The effect of exports on economic growth is modest. This paper finds no support for export-led growth hypothesis in Pakistan. Strong development of agriculture on modern scientific lines is suggested
Author(S): Runa Ray And Biswajit Chatterjee
Abstract: This paper considers a three sector competitive general equilibrium model of a small open, less developed economy suffering from unemployment problem in the adult labour market on the one hand, and from the existence of employment of child labour on the other. The economy is divided into one rural, and two urban sub-sectors. Four inputs are used in the model among which three are – sector specific in nature. The representative adult worker in this model not only supplies his own labour, but also sends his children out to work. Factor market distortion in this model is captured by the existence of a factor price differential between urban and rural sectors. The model is used to analyze the effect of imposition of tariff protection in import competing sector on the unemployment of adult workers on the one hand, and on the incidence of child labour supply on the other. An interesting result of the present exercise is that the supply of child labour moves in the opposite direction to the level of unemployment in the adult labour market as the tariff rate protection in import competing sector changes. This result runs counter to the existing view that unemployment in the adult labour market is one of the important causes for the existence of child labour market.
Author(S): Oskar Maria Baksalary and Gotz Trenkler
Abstract: In this note, the basic lemma of the linear identification problem is revisited. By utilizing a joint decomposition of orthogonal projectors as partitioned matrices, a new proof of the lemma is proposed. From the algebraic point of view, the present proof might be the simplest from among all available in the literature till now.