No. 327

APRIL 2002

Vol LXXXII

ISSN 0019-5170

 

The Indian Journal of
Economics
 

University of Allahabad

Contents


 

   Empirical Analysis of The Impact of Direct Foreign Investment on the Economy of Nigeria

FRANK A. DIMOWO AND SAMSOON EOO
 

This paper examined the impact of foreign investment on the economy of Nigeria from 1975-1994. Emphasis is on direct foreign investment and its impact on Gross Domestic product (GDP), Balance of Payments (BOP), Gross National Savings (GNS) and External Reserves (ER). These economic indicators are proxies for the economy.
Results from the analysis reveal that foreign investment has had impressive and satisfactory impact on the economy. Foreign investment was remarkably high during the period with a positive influence on the economy. The only exception is that it did not have a favorable impact on BOP. This notwithstanding, foreign investment has generally been worthwhile. There is thus the need to encourage increased inflow by improving the political climate and pursuing foreign investment policies with more zeal.

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Stock Market Development and Economic Growth in India

PRATAP CHANDRA BISWAL AND VEERASHEKHARAPPA

This paper evaluates the role of stock market development to induce economic growth in India. Considering market capitalization, value traded and turnover ratios to represent stock market development, and GNP (as proxied by the Index of Industrial Production) to represent economic growth, the present study relates economic growth to the stock market development indices by applying correlation and multiple regression analysis. The study based on monthly data (1991:1-1998:12) suggests that the stock market development plays a significant role in the economic growth process in India.

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   Promotion Institutions and Business Performance of Small-Scale Industries : Evidence from the Central Region in Ghana

J. V. MENSAH

Successive governments in Ghana, sometimes with foreign support, have established institutions and schemes to address the institutional, manpower, financial, entrepreneurial and technological needs of the small enterprise sector. Despite the efforts, very little empirical studies have been conducted on the effects of the promotional activities on the business performance of small-scale industries.
This Paper compares the business performance of the small-scale industries with support of promotion institution and those without support. Based on primary and secondary data on 175 firms and six institutions in four districts in the Central Region of Ghana, the paper argues that the existing promotional support has marginal effects on the performance of the SSI. The results have important policy implications for the government in its efforts to encourage SSIs for national development.

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   An Examination of Forward Market Efficiency Using Cointegration Techniques

HAFIZUR RAHMAN AND SHEKAR BOSE
 

This paper examines the issue of forward market efficiency using co-integration techniques. The test results lend support to the random walk hypothesis as applied to the spot and the forward rates for Canadian and Japanese foreign exchange markets. Although co-integration tests support the efficient markets hypothesis (EMH), results from the associated error correction model fail to support the EMH.

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  A Market Demand Curve Construction for a Good by Using Bivariate Probability Distribution Method

MIAO-SHENA CHEN AND CHIN-WEN TINA
 

A demand curve is usually constructed by using utility function method. Practically, it is difficult to estimate a market demand curve for a good by means of the method. The basic assumption of the study is that a demand curve for a good is influenced by two variables; the highest price a consumer is willing to pay for the good and the highest price a consumer is able to afford for the good. Then through market surveys, one can acquire these prices the consumer is willing to pay and those he is able to afford. Therefore, a market demand curve can be constructed by applying these data.

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  The Forecasting Performance of the Box- Jenkins Model: The Case of Wheat and Wheat Flour Prices in Bangladesh

Q. A. SAMAD. M. Z. ALl AND M. Z. HOSSAIN
 

In this paper forecast errors have been estimated from Box- Jenkins models for wheat and wheat flour prices in Bangladesh. Three types of forecasts have been generated using the models i.e., historical, ex-post and ex-ante. The models on the basis of which these forecasts have been computed were selected taking 6 (six) important information criteria into account i.e., Akaike's (1973) Information Criterion (AIC), Schwarz's (1978) Bayesian Information Criterion (BIC), Theil's (1961) (R2), Theil' (1971) (R2). SE (CJ) and Mean Absolute Percent Errors (MAPEs). Three types of forecast errors i.e., Root Mean Square Percent Errors (RMSPEs), Mean Percent Forecast Errors (MPFEs) and Theil's Inequality Coefficients (TICs) have been estimated and reported here. These estimates suggest that in most cases the forecasting performance of the models in question is satisfactory.

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 An Application of Resource Depletion to the System of National Accounts: A Case Study of Forest . Resource in Malaysia

A.H.M. MUSTAIN BILLAH
 

The national income account provides the most widely used indicator of economic performance, growth and economic development. The System of National Accounts (SNA) provides information to identify a country's assets and liabilities at particular points in time. Thus SNA has become the standard framework used for measuring macroeconomic performance, analyzing trends of economic growth, and providing the economic counterpart of social welfare. Presently the concept of capital maintenance applies only to physical capital; limited account is taken to the contribution of natural resource and environment to economic activity. Hicksian income is defined as the maximum value that a person can consume during a time period and still expect to be well off at the end of period as at the beginning. It is therefore, important that national income be measured correctly to indicate sustainable income. Globally policy makers are coming to realize that economic production cannot be measured without accounting for environmental concerns. Revenues derived from resource extraction have the potential to finance investment in other sectors of the economy. In order to incorporate resource depletion into the SNA present study applied user cost method. The study suggests that the trend of AGOP is a good indicator of economic sustainability. Two sustainability indicators of Pears- Atkison and World Bank also confirm the economic sustainability of Peninsular Malaysia with respect to forest resource depletion.

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  Commercial Bank's Portfolio, Composition and Economic Activity in Nigeria

R. A. AJISAFE
 

This study examines the portfolio composition of commercial banks and its impact on the economy. The study was empirically investigated between 1970 and 1998 - which covers the oil boom of the 1970s, the collapse of the oil market prices in the early 1980s and the structural adjustment programme of 1986.
The analytical technique used in the study was the Error Correction Mechanism (ECM). This is used in order to capture the long run effect of portfolio variables on GNP. In using error correction mechanism, stationarity and co integration tests were performed on the variables.
For the stationarity test, all the variables used were of order 1 1(1) and they are also co integrated in the long run. In our analysis. we make use of over parametized model where each of the variables were allowed to determine its own long length. The results of the analysis suggest that portfolio variables- Loans and Investment contribute significantly to our cross National Product for the period under review. Also one can suggest that banks may invest their portfolio in securities rather than given it out as loans.

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 Indian Stock Market In International Diversification An FII's Perspective

S. S. S. KUMAR
 

Since 1991, the Indian Economy in general and Indian capital market in particular had witnessed reforms at a pace unprecedented in the past. The number of investors participating in the securities market has grown manifold and new kinds of investors like Foreign Institutional Investors (Fils) were allowed to invest in Indian market. The basic motivation behind FII investments in India is driven by the benefits that accrue from international diversification. This study attempts to find out whether Indian Stock market is integrated with the major stock markets of the world like US, Japan, Singapore and Hong Kong. As the conventional measures like correlation estimates fail to capture such interrelationships, the study makes use of Johansen's Maximum Likelihood Method in addressing this issue. The results of this analysis show that prima facie Indian Stock Market is not co-integrated with any of the markets considered in the study. The finding of no co integration may be interpreted as evidence of international diversification benefits available to the Fils.

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 Economic Reforms and Technical Efficiency: A Study of Selected Indian Industries

M. MALLIKARJUN AND KASY AP THAKAR
 

The industrial scenario of India underwent fundamental change in mid 1980's and early 1990's with the introduction of liberalized economic policies. This paper is an attempt to verify the impact of these policies changes on the technical efficiency (TE) of Indian Industries. In this regard three major industry groups from Gujarat (one of the most developed province of India) has been considered. Technical efficiency has been measured by applying DEA (Data Envelopment Analysis).

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Fiscal Stabilization and State Finances: A Case .Study of Uttar Pradesh

 NASEEM A ZAIDI
 

Finance Commission is the apex body to bring in fiscal discipline in the state finances but the recommendations of the successive Finance Commissions failed to achieve the desired objective. The Eleventh Finance Commission drew a gloomy picture of combined states' deficit on revenue which was projected to go up from 6.04 percent in 1999-2000 to 8.61 percent of combined SOP of all the states in the year 2004-05. In case of the Union government while fiscal deficit declined from 6.6 percent of GDP in 1990-91 to 5.5 percent of the same in 1999-2000, in case of combined deficit of states it increased from 3.2 percent of SOP to 4.6 percent of the same during the same period.

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Foreign Direct Investment and Economic Growth in India: A Production Function Analysis

JAY A PRAKASH PRADHAN
 

The economic role of FDI is increasingly becoming significant in the Indian economy with the transition of FDI policy from a restrictive phase of seventies and early eighties to a relatively liberal phase of late eighties and nineties. In this context, it is essential to investigate whether FDI contributes positively to the production process, or negatively. Estimation of production function for the Indian economy suggests that FDI stock had contributed positively to the national production. Although the FDI impact was not significant for the overall period, bifurcating the sample indicate a significant impact for the relatively liberal policy phase.

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University of Allahabad