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No. 351

April 2008


ISSN 0019-5170



International Lending and Loan Portfolio Swaps: Focus versus Diversification

Li-Hung Wu
Hsiao- Tien Peng

Should bank lending be focused or diversified? This paper answers this question by examining the optimal loan rate determination based on an option-based model under multiple diversification sources: international lending and swap hedging. We provide the conditions under which the degree of a bank's international loan portfolio diversification is relatively less significant than we think. Although recent years have witnessed an increase in the degree of international lending (Cetorelli and Goldberg, 2006), even with loan portfolio swaps, our results provide an alternative explanation that the international lending portfolio of typical financial institutions is still very far from representing a truly diversified portfolio (Acharya, Hasan, and Saunders, 2006).

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The Anatomy and Consequences of Unemployment Problem in Bangladesh

Md. Abu Ralhan

Unemployment has been one of the most persistent and unchangeable problem facing Bangladesh. According to Bangladesh Economic Review 2006, 400/0 of the population in Bangladesh lives below the poverty line. The urban poverty rate is 28.4% and the rural poverty rate is 43.8% (based on CBN method and using upper poverty line). Unemployment is the principle cause for this acute poverty. About 31 % of the poor people are unemployed. Out of the total economically active population of 15 + years, 1.8 million are unemployed (BBS 2002). Presently the figure might be higher because every year a large number of persons are being added to the existing labour force. The severity of the problem has also been recognized in the newly formed Poverty Reduction Strategy Papers (PRSP) for the country. The widespread unemployment is not only impeding economic progress of the country but also producing various social and political disorders. Although thirty five years have passed since our independence in 1971, we have not been able to tackle the problem in the right way; rather tl1e problem is getting terrific form day by day. If proper steps are not taken immediately to fight this problem, it may explode like a bomb at any time. The present article attempts to analyze the nature, extent, causes and consequences of unemployment problem in Bangladesh.

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Agricultural Co-operative Credit: Problems of Recovery-Empirical Evidence from the Mid-Hill Zone Agrarian Economy of Himachal Pradesh

Sikander Kumar and Rakesh Singh

India's cooperative credit system is unique in its reach and diversity. The significant increase in the credit flow in order to achieve the quantitative aspects, the qualitative aspects, have been paid little attention resulting in loan defaults and erosion of repayment ethics by all the categories of farmers. The present paper assess the overdues and fresh flow of credit by the Primary agricultural Cooperative Credit societies and to estimate the repayment capacity of the borrowers in the study area. In order to reduce the overdues and fresh flow of credit, it is suggested that through the professional approach, operation using state of art technology, computerized accounting, market intelligence and participative decision making, proof of the vision and business acumen of the members and management can improve the efficiency of the cooperative societies. Beside, proper supervision and effective guidance from the Primary agricultural Cooperative Credit societies, crop insurance, amount in one installment and loan according to requirement are the key areas as successful factors.

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Asset Quality of Indian Commercial Banks : A Malmquist TFP Approach

Ram Pratap Sinha

During the seventies and eighties. the commercial banking sector in India operated under a regime of financial repression where the allocation of resources and pricing of deposits and loans were, to a large extent. administered. In the nineties, however, the banking environment was transformed radically following bold initiatives from the RBI relating to dismantling of entry barriers, rate deregulation, introduction of prudential accounting norm and the implementation of Basel. I capital adequacy norms. The changed competition and accounting environment compelled the commercial banks to provide unprecedented attention towards reduction in operating cost. Inter alia, improvement of asset quality has become an important agenda for the commercial banks in the reform years.

In view of the changed scenario in the Indian banking sector during the reform period, the present paper tries to make a comparison of asset quality of select (28) Indian commercial banks (20 public sector and eight private sector commercial banks) for the five year period 2000-2001 to 2004-05 using data Envelopment Analysis-a non parametric tool. For this, Standard Asset has been taken as the output indicator.

The results obtained from the exercise indicate improvement in mean technical efficiency scores in 2004-05. If we assume constant returns to scale, then the observed public sector commercial banks exhibit higher mean technical efficiency than the observed private banks. However, the reverse is true in the case of variable returns to scale. In respect of constant returns to scale, the mean technical efficiency for the observed public sector banks is 101.2% of the observed private and foreign banks while in respect of constant returns to scale, the mean technical efficiency of the observed public sector banks is 97.6% of the observed private banks.

In so far as total factor productivity growth is concerned, the observed public sector commercial banks exhibited relatively higher Malmquist TFP Index than the observed private sector banks. Actually, the observed private and foreign bank exhibited negative mean total factor productivity growth. As a result, the overall mean TFP growth is found to be negative. The negative growth (in real terms) may be the result of emphasis laid on off balance sheet activities on the part of the commercial banks.

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Analyzing the Geography Distribution and Predicting the Growth Trend of Taiwan Primary Care: Study for Chinese Medicine Clinics

Pi-Fang Hsu and Bi-Yu Chen

This study analyzes geography distribution by use concentration ratio, Herfindahl-Hirschman index (HHI) and Lorenz curve, and then predict growth trends of Chinese medicine clinics and HHI in Taiwan by applying GM (1,1) model of Grey theory. Data are obtained from the 2005 Annual Report of the Department of Health regarding Chinese medicine clinic units during period 2001 to 2004. Measurement results indicate that the Chinese medicine clinics over 45% are in leading four clustered countries, HHI among with 775 to 787, and average accuracy of the GM (1,1) model as applied to growth trends of Chinese medicine clinics and HHI are higher than 99%. The model estimates indicate that Chinese medicine clinic units will increase from 2005 to 2007, while the HHI will decrease. The study results provide a valuable reference for government authorities in formulating policies and for Chinese medicine physicians in evaluating operating location analysis.

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Measurement of Poverty and Inequality in the Mid-Hill Zone Agrarian Economy of Himachal Pradesh-Normative and Positive Approach

(Ms.) Ramna and Sikander Kumar

Poverty and inequality are closely linked in the context of economic development and social welfare. They are found in all contemporary societies, although they are more visible and manifest in some societies than in others. In this paper, an attempt is made to measure the extent of poverty and inequality in the mid-hill zone agrarian economy of Himachal Pradesh. This study shows that there is poverty as well as inequality prevalent in the study area and the inequality of income is higher among all households as compare to poor households. This study also indicates that the income of the poorest among the poor is very low mainly due to their small size of holding, higher level of dependency and lack of regular farm and non-farm employment.

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The Economic Rationale of a Municipal Water Tax: Evidence from Kolkata, India

Chirodip Mjumdar
Gautam Gupta

Municipal water supply is traditionally treated as almost a free good in Kolkata, India. Volumetric pricing strategies were not employed on the ground that citizens are not able or eager to pay tax on water. This has resulted in huge Government expenditure for running water supply system. This paper collects data from five hundred households of Kolkata to establish that there is enough economic rationale that a household will be eager to pay tax for desirable quality water. The total out-of-pocket expenditure made by a household, at present, for obtaining desirable quality water was estimated as Rs. 43.86 per month. A stated preference analysis also supports the view that people are eager to pay for desirable quality water. The mean willingness to pay (WTP) in the study was found to be Rs. 59.68 per household per month.

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Technical Efficiency of Small Scale Poultry-Egg Production in Nigeria: Empirical Study of Poultry Farmers in Imo State, Nigeria

Ukoha, Obasi Oji
Augustine, Anyanwu Chukwuma

The purpose of this study was to determine the technical efficiency of poultry egg production in Nigeria. A sample of 60 poultry-egg fanners was selected by multistage sampling procedure and data were collected by using a structured questionnaire. A stochastic frontier production function was specified and estimated, using maximum likehood estimation. The results showed that labour, farm size, feed cost, capital and utilities have a positive and significant impact on output and mean technical efficiency is 0.58 with a range of 0.43 to 0.76. Farm size, extension contact, credit, feed intake, drugs, level of education and fanning experience had positive and significant impact on technical efficiency. On the contrary, labour had a significant negative effect on technical efficiency. Recommendations include increase in farm size, provision of more extension services and increased access to credit, medication, education and cheap feed.

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Gender Employment and Earnings Mobility

Olga I. Murova

This paper analyses employment and earnings mobility by gender in testing the US labour market during the period of 1995-2004. Data from Consumer Population Survey were used. Results have proven that the trend of improving labour market conditions increased total employment of both genders, specifically indicating an increased number of people having full-time jobs during the first five-year period. Second period of recession reduced total employment; the number of full-time jobs went down and part-time jobs went up. Women exhibited greater employment immobility in both periods and their employment immobility increased during the recession. During the second time period, the number of people with improved earnings increased.

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Regional Disparities in India: An Inter-Temporal Analysis

Amitabh Tewari

Balanced regional development was emphasized right from the early stages of planned development in India and consequently massive public investment was made to develop backward states of the country along with creating favourable environment for the growth of private investment in such regions. It has been found that in spite of these massive efforts, disparities among the various states of the country widened. Using selected economic, social and other indicators for making inter-temporal comparison of regional disparities among the 16 major states of India, it has been found that the states which were already in the forward group in the year 1991-92 have performed better in the year 1999- 2000 in comparison to the states are categorized as backward states of India. Thus, it may be concluded that regional disparities have widened even during the deregulation era.

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